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’Super senior moments at RBS
It’s the middle of 2007. Executives at RBS are joining the dots about how even super senior tranches of CDOs offer scant protection in the face of a tsunami of subprime defaults.
A structure which would become commonly understood by many,
S&P takes away (CDO) diversification candy
Some very interesting proposed changes to Standard & Poor’s rating methodology for CDOs made of stuff like ABS, in the following request for comment, we think:
Standard & Poor’s Ratings
A systematic approach to the eurozone CDO
Credit Suisse have embarked on a more technical approach to our old friend, the eurozone CDO. They’ve used the five-year CDS spreads to organise the “tranches” like this:
Greece is equity; Ireland and Portugal junior mezzanine;
The CDO at the heart of the eurozone
You know, a certain FT reporter took a lot of shtick for a this article.
The gist — European sovereigns were increasingly turning to the kind of pre-crisis financial engineering to shift them out of crisis.
Further further reading
For the commute home,
- Cisco beats expectations after the bell.
- What is the Gulf Cooperation Council?
- Oil prices and trading mechanics.
- More on those new CDOs, ETFs.
- Microsoft caused the dot-com bubble.
If we build it, they will come
FT Alphaville has explored the financing and bespoke servicing role of ETFs before.
The FT’s Gillian Tett has now openly likened the products to CDOs.
Given that, we thought we would provide some further context to the nature of such things in the commodity world.
Centralised price discovery!
Behold a central pricing solution for illiquid assets… stuff like TruPS CDOs or, err, Irish bank loans.
Now that comes from independent valuation consultancy firm PF2 Securities Evaluation, so there’s more than a little self-interest here.
The EFSF chief executive writes in…
Klaus Regling, the chief executive of the European Financial Stability Facility, strives to argue in a recent letter to the FT that he is not in charge of a massive collateralised debt obligation.
For argument’s sake,
A risk management review of Citi, revealed
That’s an old Valentine’s day letter — sent on February 14, 2008 — from John Lyons at the Office of the Comptroller (OCC) to Citigroup CEO Vikram Pandit. We bring it up because it’s the subject of a new column by Bloomberg’s Jonathan Weil,
World’s best bank (2006 vintage)
It has long been known that consulting firm Oliver Wyman crowned Anglo Irish the world’s best bank in 2006 — just when Anglo was actually… well, you know the story.
Sadly, the report that bestowed this fateful distinction has (quite unaccountably!) vanished from the Oliver Wyman corporate site.
Greece as a CDO
One way to think about EFSF-financed Greek bond buybacks is as an informal exercise in a collateralisation and tranching of sovereign debt.
An exercise, in short, in converting a country into a collateralised debt obligation.
Goldman’s uneasy subprime short
In early 2007 Wall Street was in the early stages of the subprime crisis.
Spreads on the ABX indices, which had become synonymous with the crisis, were falling. And Goldman Sachs was about to do something which would eventually lead it to a $4bn profit and make it one of the last banks standing on Wall Street.
CDO lemons, a government fruit bowl
‘Asymmetric information’ in Collateralised Debt Obligations is not a good thing.
That much we know from Goldman Sachs’ Abacus 2007-AC1 CDO and, err, Goldman Sachs’ Abacus 2006-13 and Abacus 2006-17 deals.
UBSoiled all over again
Because the first 50-page report into shareholders’ subprime losses, released in April 2008, was not enough. UBS have now published a 76-page “Transparency report to the shareholders of UBS.”
This Swiss bank is a sucker for subprime pain.
ProPublica on the CDO daisy chain
Having told the tale of hedge fund Magnetar in April, Propublica and Planet Money have gone after even bigger game in their latest investigative piece.
The new article by Jake Bernstein and Jesse Eisinger describes,
The FSA’s finance fix (Part III): dampening profits
Continued from Part II.
A valuation-based approach may be the FSA’s preferred option for fixing banks’ trading books and fortifying them against future risk, but it’s difficult, to say the least. The very thing the FSA is trying to remedy — inconsistent valuations — seem endemic in the financial system:
The FSA’s finance fix (Part I): credit is different
Behold — your financial crisis/accounting/structured finance/financial reform reading for the weekend:
The 126-page discussion paper is from the UK’s Financial Services Authority, and it deals specifically with banks’ trading activities — something which,
Software of the subprime crisis
Here’s a novel idea about the CDO component of the subprime and financial crisis.
As late as 2003 CDOs were — believe it or not – still being described with words like “Toxic. Explosive. Opaque.”
A CDO-esque gold investment
Hinde Capital, the London-based gold hedge fund — with an objective to outperform gold — have put out a note about what they feel are the CDO-esque qualities of the GLD gold exchange traded fund.
And yes,
Pyxified, Merrill’s subprime sink
Have you ever heard of Merrill Lynch’s Pyxis CDO/SPV/Insert Structured Finance Acronym?
It’s confusing a lot of people this week, after the NYT’s Louise Story exhumed the deal, which she says was a way for the bank to shift its subprime exposure off-books.
How Dodd-Frank travels – all the way to Canadian ABCP
DBRS’s Andrew Fitzpatrick has a wonderfully understated way of putting things:
. . . it would be something between ironic and sad if the best-laid plans of the Montréal Accord, a difficult but ultimately successful private-sector restructuring in response to the financial crisis,
Citi’s super senior subprime SEC slip
One of these is a draft version of a third-quarter pre-earnings announcement Citigroup considered making in the credit-crunched October of 2007, in reference to its subprime exposure. The other is what actually went out.
The tale of the Shadow Banks
Here’s a scary story to recount at finance campfires.
It’s the Federal Reserve Bank of New York’s monograph on the rapid growth — and collapse — of the shadow banking system. It’s also 81-pages of acronyms (think CDOs,
A new type of TruPS warfare
TruPS CDOs may have escaped the full wrath of US financial reform, but they still have to deal with the rather daunting prospects of their underlying collateral — those Trust Preferred Securities (TruPS).
The AIG e-mails, or, 250,000 pages of bail-out oddity
Currently sweeping the blogosphere: 250,000 pages of AIG-related emails.
The documents were released by the House Committee on Oversight and Government Reform in May, but have been helpfully sifted through and linked to by the New York Times.
Building a better Gaussian copula
It’s ba-ack. The formula that famously felled Wall Street.
The Gaussian copula — with which banks famously evaluated correlation risk for things like CDOs — did not quite live up to its hype. A normal distribution bell curve turned out not to be able to sufficiently take into account correlated default risk for things like subprime mortgages.
Those Triaxx CDOs…
Collateral managers beware! The SEC is coming for you.
The SEC on Monday filed a suit against ICP Asset Management — the boutique investment bank once indirectly described by AIG execs as one of the,
Eternal sunshine of the securitisation mind
It’s conference time!
The 2010 Global ABS meet is currently taking place at the Hilton Metropole, just across from the Marks & Spencer on Edgware Road in London. This is rather a fall from grace,
Ambaaaac! Trouble in mezzanine tranches of CDOs, that is
Here’s a structured finance blast from the past; some trouble in mezzanine tranches of ABS CDOs.
Last week the ailing (in fact, almost dead) bond insurer Ambac announced it would commute its remaining $16.4bn of of exposure to Collateralised Debt Obligations of Asset-Backed Securities.