CDO market looks to a broader asset base

Falling credit ratings and under-performing deals in 2002 are causing dealers to include new asset classes in CDO structures. But is this a purely defensive move, or part of the broader evolution of the market? Keith Brody reports

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The collateralised debt obligation (CDO) markets in the US and Europe are taking divergent paths this year. While volumes are expected to remain broadly flat in the US, dealers expect another year of growth in Europe. On both continents, innovation in the form of structural enhancements required to protect the interests of increasingly discerning CDO investors may help spur activity.

Dealers believe the market’s development is likely to depend on the inclusion of new asset classes such as US

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