Rating agency Moody's Investors Service today said it has published a series of guidelines outlining the steps by which a collateralised debt obligation (CDO) hedge counterparty can better detach its own credit risk from the CDO itself.Moody’s said it decided to publish the guidelines to help limit the level of expected loss arising from counterparty risk, with an eye toward better protecting the senior tranches of CDOs.
The guidelines include detailed specifications for the posting of collateral when a hedge counterparty is downgraded and for the appointment of a more highly rated counterparty should the counterparty's ratings decline significantly. The guidelines also address the use of hedge guarantees from more highly rated institutions as an added option, the agency added.
More on Credit Derivatives
EU stress tests showed €34.5 billion notional legacy book
Clearing credit hub closes, with Markit citing disappointing Sef volumes
UBS in Australia sold off CDS portfolio in fixed income scale-back
Fears relationship between credit indexes and constituents becoming more tenuous
Sign up for Risk.net email alerts
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
Nominated for two technology awards
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.