Performance anxiety

Collateralised debt obligations (CDO) volumes are booming, but there may be cracks under the facade. Many investors were burned by CDO collateral credit deterioration last year, and buyers in general are demanding standardised and reliable performance metrics. Paul Lyon reports

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Bankers say collateralised debt obligations (CDOs) with CDOs as collateral – CDOsof CDOs – will take off in the next few years. These can allow investorsto manage their CDO investments more efficiently, transferring risk and optimisingtheir portfolios. But investors, managers and underwriters all face a persistentproblem – how to gauge the performance of a CDO of CDOs if you can’tbenchmark the performance of a CDO in the first place.

This issue is driving the CDO market to address

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