Rating the product

The complexity and opaqueness of many CDOs have meant that the rating agencies have carved out animportant niche in the market, helping investors understand the risks CDOs present

Over the past decade, the leading credit rating agencies have become increasingly pivotal players in the evolution of the market for credit derivatives in general and for COs in particular. The three leading rating agencies – Fitch, S&P and Moody’s – have all developed methodologies to subject pools of assets to stress tests and hence to determine the levels of over-collateralisation or credit enhancement required for the respective credit ratings of each tranche of notes.

Fitch describes the