4 votes
Accepted

Reproduce CDS Index Default Probability via Tranche [0,100] Probability

It is actually that you forgot your $1 - R$ in formula (2) :) The index survival curve is defined similarly to the tranche's : $Q\left(t\right) = 1 - \mathbb{E} \left[L\left(t\right)\right] = 1 - \...
siou0107's user avatar
  • 2,680
2 votes

Why does/did a CDO need a "sponsor"?

The sponsor of the CDO is the collateral manager. In order for a CDO to be issued, someone has to buy the assets that are underlying or backing the tranched default obligations. In other words, the ...
AlRacoon's user avatar
  • 6,447
2 votes
Accepted

ABS vs covered bonds vs CDO

MBS are securities which represent ownership in a pool of mortgages ABS are securities which represent ownership in a pool of assets other than mortgages (for example auto loans or credit card loans) ...
Alex C's user avatar
  • 9,372
2 votes

CDOs before the 2007 crisis

They ranged from somewhat complex to highly complex. Ultimately though, a CDO like any bond contract, is just a legal document outlining a waterfall of cash flows based on ratings triggers, ...
Edward Watson's user avatar
1 vote

Why does/did a CDO need a "sponsor"?

"Why was it not profitable (or seem profitable) for the banks that were creating these CDOs to make products with only mezzanine and senior tranches?" As far as my understanding of the CDO market ...
Daneel Olivaw's user avatar

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