Risk conference speakers predict more gloom for CDO buyers

Recent years have seen the proliferation of highly structured, highly leveraged, CDO structures. But the bear market and record default levels have created a toxic legacy for many investors – and market practitioners speaking at the Credit Risk Summit do not believe the CDO market is over the worst.

“Most CDO structures done in the last three or four years will be tested in some way, either by the rating agencies, banks’ own models or in terms of the underlying rationale of the deals,” predicted David Henriques, head of Royal Bank of Scotland’s global risk financing group. Henriques voiced his concern over the development of different standards for restructuring of CDOs in the US and European markets.

Gerwinn Scharmann, head of portfolio finance at Bankgesellschaft Berlin, went even further in his criticism of the CDO market. “People don’t know how to price transactions,” he said. All too often, Scharmann added, that confusion extends to the investment banks trying to sell the investments, as well as the buyers.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Calibrating interest rate curves for a new era

Dmitry Pugachevsky, director of research at Quantifi, explores why building an accurate and robust interest rate curve has considerable implications for a broad range of financial operations – from setting benchmark rates to managing risk – and hinges on…

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here