A new twist
The first constant proportion debt obligation was met with both awe and trepidation. Six months on, credit structurers have donned their white lab coats to deliver their versions of this ground-breaking product. Duncan Wood reports
When ABN Amro launched Surf, the first constant proportion debt obligation (CPDO), last July, it was hailed as a stunning piece of alchemy. The bank had combined exposure to five-year credit derivatives indexes with a leverage formula to create credit market gold: AAA-rated paper paying a coupon of 200 basis points. However, the intervening months have taken some of the shine off the product, with criticism being levelled at the mechanical rules underpinning it.
"There were a lot of people who
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