Speakers voice synthetic credit and capital structure arbitrage fears

“In the past, some investors in CDOs [collateralised debt obligations] really didn’t understand the product,” Mahdevan said. He urged investors not to be fooled by the ratings of single-tranche products. “Ratings refer to default risk, but they don’t tell you anything about leverage or volatility,” he added.

Mahdevan said a market for options on credit derivatives is several years away from truly hitting its stride.

Sean Keenan, a vice-president in Citgroup’s risk architecture group, said it

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