CPDOs: riding the wave
Citi says we had better get used to them and their effect on the market. Others think they are too good to be true. Can CPDOs do no wrong?
One of the highlights of the evolution of the European structured finance market in 2007 was the emergence of constant proportion debt obligations (CPDO). According to a Fitch analysis: "CPDOs are essentially a variant of CPPI, the main difference being a fixed coupon with no upside and different leverage rules. Like credit CPPIs, CPDOs give leveraged exposure to credit portfolios, although they do not offer principal protection to investors."
In a CPDO, the size of those credit portfolios varies
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