http://db.riskwaters.com/public/showPag ... 02065Sorry.. but I don't quite understand how the Credit Sail note works... if anyone can kindly give me some clue.. that would be greatly appreciated!! (ie, what exactly am I holding? long or short CDS? when would I make money? etc)(I understand how CPPI works.... )Thanks a lot!!!

HiA very good friend of mine is responsible for this Credit Sail. I could ask him (and I could be interested too, since I have not looked into it)

Seems that they are not taking default risk as they state "The only scenario where it wouldn’t perform well is where there is a lot of spread volatility, with spreads continuously going out and coming in, because that would eat away the cash reserve through constant leveraging and de-leveraging.” i would also be interested too. carry positive strategies usually involve taking some risk, whether default and spread or hedging the first order spread risk out with some curve or equity mezz approach.also if some banks are writing CPPI on a hedge fund building block, how are they calculating the volatility of the CPPI building block on which the leverage rules are applied? There are various things that could go into such a structure.

The UBS product sounds pretty complicated with both CDS and CMCDS contracts mixed in.It's hard to say from the description what the Calyon product is. They might have leveraged the bejesus out of iTraxx/CDX swaps, or they might be using equity tranches. In any case as an investor you are taking default risk, to an extent, but the whole thing is floored in value by using CPPI to allocate risk to the risky credit piece. Normally I think you hedge CPPI gap risk using FTD contracts - it would be interesting to hear how they lay off that risk.

Seeing many impressive backrest charts showing attractive returns, I wonder if the total return is also a function of rebalancing frequency. If underlings are standard indices, has anyone tested the optimal rebalancing period?