Australian CPDO judgment reveals S&P and ABN Amro's errors

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In late 2006, the head of securitisation at a large European bank attended a Moody’s Investors Service conference on structured finance. One presentation extolled the benefits of a complex, new product called a constant proportion debt obligation (CPDO) that boasted a triple-A rating despite being based on indexes containing BBB-rated corporates. It promised to pay an incredible 200 basis points above Libor.

That didn’t make sense to the securitisation head. “I thought at the time that it was

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