Weighing up the risks and rewards of CDOs

The expanding CDO universe has increased its diversification during the past few years. This should translate into more robust credit quality and a reduced risk of downgrades, though some commentators question the link between diversification and performance

A conspicuous trend in the CDO market, and one that gathered pace in 2004, was the sale of notes to a much broader range of investors than before, with pension funds, insurance companies, private banks and high-net-worth individuals all becoming increasingly active participants.

Among those CDO managers that have been at the forefront in promoting the increased diversity of the market is Axa Investment Managers. Its $3.5 billion Overture CDO, issued in 2003, established a new benchmark by being

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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