Collateralised debt obligations (CDOs)
Goldman charged over CDO role
The US Securities and Exchange Commission filed a lawsuit against Goldman Sachs in April, alleging the firm misled clients. Some observers suggest the action may not be successful, but criticise Goldman’s behaviour. By Mark Pengelly and Duncan Wood
Goldman criticised over CDO after SEC lawsuit
Goldman Sachs has been sharply criticised for arranging a synthetic collateralised debt obligation (CDO) at the centre of a lawsuit filed by the US Securities and Exchange Commission (SEC) last week.
Happier times for distressed assets?
The distressed assets sitting on the balance sheets of financial institutions have increased in value in recent months, with a variety of firms reporting paper gains. Has the turning point been reached in distressed structured credit assets? Peter…
Individual names in top-down CDO pricing models
The Gaussian copula collapsed as a means of pricing collateralised debt obligations in the crisis of 2008, as to match prices and deltas nonsensical correlation parameters were required. By adapting the traditional framework to cater for more general…
Profiting from CDOs
Investors that snapped up cash bonds and other simple credit assets at the start of last year have made large profits as the credit market rallied strongly in 2009. While many of the obvious credit opportunities have disappeared, some market participants…
Pricing and hedging basket credit derivatives in the Gaussian copula
The static assumptions of the Gaussian copula model have long presented an obstacle to dynamic hedging of credit portfolio tranches. Here, Jean-David Fermanian and Olivier Vigneron combine the copula with a spread diffusion to derive hedging error as…
Collateral replacement
At the height of the financial crisis, manufacturers were quick to mitigate mounting counterparty risk concerns by deploying products issued by collateralised special purpose vehicles. But now, as the yield junkies return and retail appetite for…
A market model on the iTraxx
A market model for the dynamics of credit-risky baskets and indexes such as the iTraxx has long been sought, but because of difficulties with the natural numéraire has remained elusive. Here, Philippe Carpentier proposes using hedging arguments to…
Benefits of Basel II
Regulation
EC continues tough stance on securitisation
In its latest round of proposals for modifications to the Capital Requirements Directive (CRD), the European Commission has confirmed its intention to assign higher capital requirements to re-securitisations and to enhance disclosure requirements for…
Morgan Stanley CDO repack designed to test investor appetite
Morgan Stanley's offering of a repackaged cash collateralised debt obligation (CDO) is designed to test market appetite for this type of risk, said a source familiar with the deal.
Ratings redux
Rating agencies have been lambasted for perceived failings in their collateralised debt obligation (CDO) rating methodologies. The leading agencies have published revised methodologies, but has it swung too much the other way? With the CDO market in the…
Long overdue
New due diligence and risk weighting guidance for resecuritisations aims to prevent a repeat of the credit crisis, but should these measures have been included in the 2006 version of Basel II? By Peter Madigan
Escape hatch
Monolines
Gamma loss and prepayment
Peter Jackel presents a model for the dynamics of fractional notional losses and prepayments on asset-backed securities for the valuation and risk management of derivatives, including waterfall structures and other structured debt obligations on bespoke…
A free lunch and the credit crunch
Monoline insurers act as triple-A guarantors of the senior risks in structured finance. A purchaser of credit insurance or protection from a monoline may argue that they take only a small amount of the counterparty risk that is a common side-effect of…