The reason to issue

The initial reason for collateralisation of debt was the same as that for any securitisation, to free up more of the banks’ balance sheets. But since the mid-1990s CDOs have become a way for originating firms to arbitrage rating inefficiencies

cdo-cover-gif

An apparent paradox associated with the rapid expansion of the CDO market is that it has come against a backdrop of a performance track record that can hardly be said to have been distinguished. A study published by Moody’s in February 2003 found that between 1991 and 2002, CDOs had what the agency described as an “extremely high downgrade rate” (of 10.9%) and a very low upgrade rate (of 0.6%). That, Moody’s explained, was “primarily due to the extraordinary number of downgrades and defaults in

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here