Credit model rethink

Synthetic credit

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The millions of dollars in market-to-market losses that hit dealer proprietary trading desks and hedge funds in May have sparked concerns that credit models deployed by a number of leading financial institutions may not be working properly.

While regulators believe the overall losses related to positions held in tranches of collateralised debt obligations (CDOs) have not impaired dealers' capital, the issue has raised concerns about what exactly went wrong. "A shock like this makes

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