Bespoke panacea?
Substitution rights allow investors, third-party asset managers and even dealers to substitute healthy for deteriorating credits in bespoke single-tranche synthetic CDOs. Some dealers say they’re offering these options for free – but what value do they really add? By Gallagher Polyn
Bespoke single-tranche synthetic collateralised debt obligations (CDOs) are one of the most popular innovations in the CDO market in years. “We like the idea of selecting the underlying credits in the portfolio,” says Bob Coors, senior vice-president at Ace Guaranty Corporation in New York, which booked its first reverse-enquiry single-tranche deal in the first quarter of 2002. “This
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