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Collateral concerns

Collateralised foreign exchange obligations are hitting the market, offering sophisticated investors easy access to the asset class in a credit-type format. But at a time when mark-to-model pricing and rating agency credibility are coming under fire, is it a step too far? By John Ferry

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The investment case seems clear enough. Institutional investors are engaged in a constant search for diversification and yield enhancement, yet many are constrained by strict mandates that prohibit investing in non-rated assets. So it was only a matter of time before investment bankers would take the techniques developed in the structured credit market and apply them to new types of assets

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