Solutions or smokescreens?

CDO downgrades in 2002 angered investors and forced dealers to devise a host of structural improvements. Which modifications are the rating agencies applauding – and which are just smokescreens? Keith Brody reports

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Collateralised debt obligation (CDO) investors have suffered two years of pain as the collateral backing many of the deals – especially high-yield transactions – has plummeted in value. To lure investors back to the market, dealers have rolled out a number of structural improvements aimed at preventing significant changes in a CDO’s risk profile and protecting the divergent interests of different groups of CDO investors.

“There have been a number of performance issues with CDOs recently where

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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