S&P said that either corporate or asset-backed security portfolios can be created, with either fixed or floating payment characteristics. The user inputs assumptions with regard to assumed recoveries, the capital structure of the CDO and the amount of buffer there will be in the rating. The system then determines the subordination level required for each CDO tranche as dictated by the credit quality of the portfolio.
“For new participants to the CDO market, this tool will allow them to quickly grasp how portfolio credit quality is impacted with changes in a portfolio’s ratings, maturities, levels of industry diversification and size of individual asset positions,” said Sten Bergman, a managing director in S&P’s global CDO group.
S&P supplies the system free of charge.
The week on Risk.net, July 7-13, 2018Receive this by email