What lies beneath?

CDO pricing

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Dealers pitch portfolio credit products to investors as a safe way of staying afloat in the market, well away from the choppy waters of equities and bonds. And some dealers’ sophistication, combined with growing default swap liquidity, has enabled their desks to sell individual tranches of credit risk without issuing the remainder of the capital structure. During the past 18 months, these so-called bespoke mezzanine and equity tranches have become popular among yield-hungry investor

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