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Information gold mine

The nascent secondary market in bespoke correlation tranches has become a font of pricing information. Traders are keenly monitoring all transactions to help calibrate their pricing models. Rachel Wolcott reports

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The fallout from the correlation crisis following the downgrade of Ford and General Motors in May last year has been widespread. The market dislocation made for some tough on-the-job learning for correlation traders and risk managers. Since then, correlation pricing models and risk management practices have been put under the microscope. One outcome of the May crisis observable in today's market

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