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Gamal
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CDOs are back?

January 14th, 2014, 3:10 pm

New dataYear Issuance2000 67,987.7 2001 78,453.8 2002 83,074.3 2003 86,629.8 2004 157,820.7 2005 251,265.3 2006 520,644.6 2007 481,600.7 2008 61,886.8 2009 4,336.0 2010 8,665.9 2011 31,131.3 2012 50,727.9 2013 86,242.4 We are back in the year 2003.
Last edited by Gamal on January 13th, 2014, 11:00 pm, edited 1 time in total.
 
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frenchX
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CDOs are back?

January 17th, 2014, 1:44 pm

then we can only hope that compared to 2003:-risk management and internal control increased-pricing and hedging model are more precise and more realistic (gaussian copula was not a good idea afterward)-banks books are more diversified and have enough capital to support another big shot-ethics and behaviour changed to support social responsability and long term value-the rating agencies do their job in total independence and that rating are based on real micro corporate finance analysis-the state has enough power to prevent another systemic shockso basically (since almost nothing has changed) we will be screwed again.
 
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daveangel
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CDOs are back?

January 17th, 2014, 1:47 pm

QuoteOriginally posted by: frenchXthen we can only hope that compared to 2003:-risk management and internal control increased-pricing and hedging model are more precise and more realistic (gaussian copula was not a good idea afterward)-banks books are more diversified and have enough capital to support another big shot-ethics and behaviour changed to support social responsability and long term value-the rating agencies do their job in total independence and that rating are based on real micro corporate finance analysis-the state has enough power to prevent another systemic shockso basically (since almost nothing has changed) we will be screwed again.you may be but probably not in the same way as before. markets like to try new positions.
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Gamal
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CDOs are back?

January 18th, 2014, 9:15 am

QuoteOriginally posted by: frenchXthen we can only hope that compared to 2003:1. risk management and internal control increased2. pricing and hedging model are more precise and more realistic (gaussian copula was not a good idea afterward)3. banks books are more diversified and have enough capital to support another big shot4. ethics and behaviour changed to support social responsability and long term value5. the rating agencies do their job in total independence and that rating are based on real micro corporate finance analysis6. the state has enough power to prevent another systemic shock1. A bit but not enough2. Yes, we know much more about credit risk.3. Banks are strongly undercapitalized.4. Joke, we are as egoistic and blind as we were before.5. Yes, there's improvement. CDOs aren't rated these days 6. Joke, all states are short of money as in the war time.
 
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Gamal
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CDOs are back?

October 13th, 2014, 8:39 am

U.S. CLO new issuance has broken through the all-time annual issuance record, reaching $97.11 billion from 179 deals in the year to date, according to LCD. The previous record was set in 2006, when issuance totaled $97.01 billion.We learn from history that we don't learn from history.
 
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Traden4Alpha
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CDOs are back?

October 13th, 2014, 10:06 am

QuoteOriginally posted by: GamalU.S. CLO new issuance has broken through the all-time annual issuance record, reaching $97.11 billion from 179 deals in the year to date, according to LCD. The previous record was set in 2006, when issuance totaled $97.01 billion.We learn from history that we don't learn from history.There's really nothing wrong with CLOs that are not wrong for ALL types of issued debt.
 
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Gamal
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CDOs are back?

October 13th, 2014, 10:19 am

If there's nothing wrong with ratings and pricings - we may argue.
 
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Traden4Alpha
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CDOs are back?

October 13th, 2014, 10:35 am

QuoteOriginally posted by: GamalIf there's nothing wrong with ratings and pricings - we may argue.I suspect that you and I would agree that there's a great many things wrong with ratings and pricings. Where we might differ is whether CLOs are uniquely wrong in the ratings and pricings arena or whether all debt instruments and other long-term obligations don't have analogous deep flaws in how they are rated and priced.
 
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Gamal
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CDOs are back?

October 13th, 2014, 10:47 am

CLOs are particular. Rating agencies know better or worse how to evaluate individual issuers and all their numerous flaws are under control, they may cause losses but not armageddons.It's not the same with structural debt, here rating is strongly model-dependent and relies on unobservable quantities. Do we have that much confidence in a once failed model? I don't.
 
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Traden4Alpha
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CDOs are back?

October 13th, 2014, 10:55 am

Hmmm... I seem to recall that rating agencies systematically misrated individual issuers (banks, corporates, and sovereigns) and that a great many mortgage underwriters systematically misrated individual mortgages, too.The selling of sows ears as silk purses was rampant in all markets (not just CLOs) during the bubble and maybe it still is.(P.S. I would sincerely hope that the models for pricing CLOs have evolved since 2008.)
 
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Gamal
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CDOs are back?

October 13th, 2014, 11:01 am

QuoteOriginally posted by: Traden4AlphaHmmm... I seem to recall that rating agencies systematically misrated individual issuers (banks, corporates, and sovereigns) and that a great many mortgage underwriters systematically misrated individual mortgages, too.So I've written - they've caused losses but not armageddons. Misrating once upon a time isn't a systemic problem, only a total misrating is.QuoteOriginally posted by: Traden4AlphaP.S. I would sincerely hope that the models for pricing CLOs have evolved since 2008.I don't have good news for you.
 
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Traden4Alpha
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CDOs are back?

October 13th, 2014, 11:24 am

QuoteOriginally posted by: GamalQuoteOriginally posted by: Traden4AlphaHmmm... I seem to recall that rating agencies systematically misrated individual issuers (banks, corporates, and sovereigns) and that a great many mortgage underwriters systematically misrated individual mortgages, too.So I've written - they've caused losses but not armageddons. Misrating once upon a time isn't a systemic problem, only a total misrating is.I don't think CLOs caused 1929, 1987, the Asian currency crisis or any of the many other bubbles and crashes that have characterized human financial systems. Minsky makes no mention of CLOs in describing one of the key structural causes of armageddons (armagedda?) The central system flaw in economic systems in written in the ROM of the human brain -- how it perceives risk and how it reacts to a perceived absence of risk.QuoteOriginally posted by: GamalQuoteOriginally posted by: Traden4AlphaP.S. I would sincerely hope that the models for pricing CLOs have evolved since 2008.I don't have good news for you.LOL!
Last edited by Traden4Alpha on October 12th, 2014, 10:00 pm, edited 1 time in total.
 
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Gamal
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CDOs are back?

October 13th, 2014, 11:39 am

CLOs survived the crisis of 2007-2008 relatively well, they probably aren't a problem but we are. We don't know much more about systemic risk than we knew in 2008.To be honest - we may know even less because in the olde good days the topic was discussed, a lot of research was published, you had a new copula every week. And now... using the word CDO/CLO in public isn't much different from farting.
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