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Gamal
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Joined: February 26th, 2004, 8:41 am

CDOs are back?

April 10th, 2013, 12:08 pm

SIFMAYear Total2000 67987.72001 78453.82002 83074.32003 86629.82004 157820.72005 251265.32006 520644.62007 481600.72008 61886.82009 43362010 8665.8822011 31131.3432012 58087.8 Between 2009 and 2013 (3 Y) the market grew up fourteen times. In a couple of years we are back in 2006. Never trust human memory.
Last edited by Gamal on April 17th, 2013, 10:00 pm, edited 1 time in total.
 
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frenchX
Posts: 5911
Joined: March 29th, 2010, 6:54 pm

CDOs are back?

April 10th, 2013, 2:05 pm

Really ? ! Did the pricing improve?What about CDO²? If they are back too that simply means that bankers are stupid ...
 
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QuantCentral
Posts: 45
Joined: January 24th, 2013, 9:16 pm

CDOs are back?

April 10th, 2013, 2:28 pm

No, haven't seen/heard of CDO² lately.CDOs are all over the place again. Do anyone know what is the industry-standard model for CDO now?
 
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Gamal
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Joined: February 26th, 2004, 8:41 am

CDOs are back?

April 10th, 2013, 3:20 pm

Krekel and Amraoui and Hitier.BTW - being the last guy I would change my name.
 
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frenchX
Posts: 5911
Joined: March 29th, 2010, 6:54 pm

CDOs are back?

April 11th, 2013, 9:19 am

What are the underlying asset class for those ones? Mortgages or firms? Moreover the troubling question for me how do you hedge CDO? Index CDS? A portfolio of single names CDS? Corporate bonds? And for Mortgage Backed ones?
 
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Gamal
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Joined: February 26th, 2004, 8:41 am

CDOs are back?

April 11th, 2013, 9:47 am

I don't know
 
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daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

CDOs are back?

April 11th, 2013, 9:54 am

QuoteOriginally posted by: frenchXWhat are the underlying asset class for those ones? Mortgages or firms? Moreover the troubling question for me how do you hedge CDO? Index CDS? A portfolio of single names CDS? Corporate bonds? And for Mortgage Backed ones?why do you need to hedge it ?
knowledge comes, wisdom lingers
 
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bearish
Posts: 5788
Joined: February 3rd, 2011, 2:19 pm

CDOs are back?

April 11th, 2013, 11:13 am

A closer look at the SIFMA spreadsheet shows activity in two categories: CLOs and STF CDOs. The former held up reasonably well during the crisis and is back with minor tweaks to the documentation - there is a notion of CLO 2.0, and the main difference from the original is higher subordination for the AAA tranche. This has been mostly a US phenomenon, but the first post-crisis Euro CLO is about to be launched. The STF stuff is, I believe, created for the single purpose of being used as collateral for ECB financing, so it is not floating around in the market.
 
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rmax
Posts: 6080
Joined: December 8th, 2005, 9:31 am

CDOs are back?

April 11th, 2013, 5:15 pm

Time to buy shares in banks! They will never let another IB like LEH go to the wall again in the next 30 years.
 
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bearish
Posts: 5788
Joined: February 3rd, 2011, 2:19 pm

CDOs are back?

April 11th, 2013, 10:07 pm

Just to clarify a couple of things about the CLOs -- they are managed portfolios of corporate loans that are financed by a set of bonds that have a tranched structure as well as a variety of tests that will (in general) direct cash flows to the senior bond holders and limit reinvestment activity by the manager if the performance of the portfolio deteriorates. Nobody needs to hedge anything. It is basically a 20-year old product with very minor wrinkles added to deal with lessons learned in the interim (and in particular during the crisis).
 
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frenchX
Posts: 5911
Joined: March 29th, 2010, 6:54 pm

CDOs are back?

April 12th, 2013, 5:58 am

I was wondering if you know the CDS spread on all the underlying entities of the CDO can you infer price bounds ?More mathematically speaking if you know the marginal distribution of default can you put some bounds on the joint distribution of default? For simplicity first with a constant recovery.
 
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katastrofa
Posts: 9569
Joined: August 16th, 2007, 5:36 am
Location: Alpha Centauri

CDOs are back?

April 12th, 2013, 7:14 am

QuoteOriginally posted by: rmaxTime to buy shares in banks! They will never let another IB like LEH go to the wall again in the next 30 years.It's a binary option. Either it goes as you say, or they do something drastic to defuse the bomb. Muddling through doesn't work.
 
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bearish
Posts: 5788
Joined: February 3rd, 2011, 2:19 pm

CDOs are back?

April 12th, 2013, 9:40 am

QuoteOriginally posted by: frenchXI was wondering if you know the CDS spread on all the underlying entities of the CDO can you infer price bounds ?More mathematically speaking if you know the marginal distribution of default can you put some bounds on the joint distribution of default? For simplicity first with a constant recovery.If you poke around here defaultrisk.com you should be able to find a few dozen papers on this and very closely related topics -- as it pertains to synthetic CDOs. Theoretical limitations aside, there are at least three practical problems with applying these models to the current crop of CLOs: 1) you would only be able to find CDS quotes for a tiny minority of the names whose loans appear in a CLO; 2) manager behavior plays a role - and over time a growing fraction of the portfolio will be loans of names that are not initially in the portfolio; 3) the presence of tests and triggers in the cashflow waterfall makes the mapping from collateral defaults to bond cashflows a lot more complicated than in a synthetic CDO.
 
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APlus
Posts: 198
Joined: August 28th, 2012, 9:20 am

CDOs are back?

April 18th, 2013, 11:02 am

Is it a split between CDO's and synthetic CDO's in the numbers posted (Wed Apr 10, 13 03:08 PM ) by @Gamal?
 
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bearish
Posts: 5788
Joined: February 3rd, 2011, 2:19 pm

CDOs are back?

April 18th, 2013, 1:19 pm

All the post-crisis issuance has been cash products. You can see detailed breakdowns in the SIFMA spreadsheet.
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