CPDO ratings scorned at credit risk summit
Rating agencies have come under attack once again for assigning ratings to constant proportion debt obligations (CPDOs), during a panel discussion at Risk’s 2007 Credit Risk Summit Europe in London.
The idea of rating CPDOs and other structured products has caused rancour, as their expected loss effectively relies on the success of a trading strategy and has little to do with creditworthiness. Moreover, the strategy they rely upon has recently suffered due to higher-than-expected market volatility.
Jon Gregory, global head of credit derivatives quantitative analytics at Barclays Capital, said that competition for business among agencies had propelled them into rating the products. "The
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