Fitch Ratings has upgraded its Default Vector model, which evaluates default risk in collateralised debt obligation (CDO) portfolios.Vector is used to analyse exposures in CDO portfolios, including asset-backed CDOs, leveraged loans and investment-grade corporates, which typically have 100 to 200 exposures. It is also used for synthetic CDO-squared transactions. Vector 2.1 can now accommodate 50 CDOs in total, up from version 2.0’s capacity of 30. The two versions are otherwise unchanged.
“It's an asset model, not a cashflow model”, said Matthias Neugebauer, London-based director at Fitch Ratings. “It produces expected default rates and expected loss rates for the portfolio,” he added. The CDO-squared market usually has between five and 15 CDO transactions, but the extra capacity gives users the option of analysing more than 30 if required.
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