Posts tagged 'synthetic CDOs'

Kids, can you count to 15 Enrons?

| Aug 10 2011 17:33 | Comment |

Fresh out of the SEC on Wednesday morning, a depressing allegation of fraud that hints at the absurdity of the working definition of “fiduciary duty” when it comes to municipalities.

In a complaint filed in federal court in Milwaukee, the SEC alleges that Stifel and Senior Vice President David W. Noack created a proprietary program to help the school districts fund retiree benefits by investing in notes linked to the performance of synthetic collateralized debt obligations (CDOs). The school districts established trusts that invested $200 million in three transactions from June to December 2006, paid for largely with borrowed funds. According to the SEC’s complaint, Stifel and Noack misrepresented the risk of the investments and failed to disclose material facts to the school districts. In the end, the investments were a complete failure, but generated significant fees for Stifel and Noack. Read more

Synthetic junk

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Mar 09 2011 13:21 | Comment |

Here’s an interesting Wednesday story from the Financial Times’ Aline van Duyn.

It concerns growing demand for a synthetic product — this time linked to junk, or high-yield, bonds. The market size of the product (which is tranched and linked to Markit’s CDX index) is still relatively small. But demand for actual junk bonds has been strong recently — with average junk prices even hitting par value during 2010. Read more

Lehman in SCDO trial down under

| Mar 03 2011 08:15 | Comment |

Bloomberg reports Wednesday on the first day of an Australian trial involving a long-running dispute with potentially interesting consequences for notions of fiduciary duty:

Wingecarribee Shire Council, the City of Swan and Parkes Shire Council claim they were sold improper investments as Lehman pushed synthetic collateralized debt obligations, or SCDOs, to collect fees and commissions that were greater than it would have earned from selling term deposits. Read more

A risk management review of Citi, revealed

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Feb 24 2011 14:48 | Comment |

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, provocatively titled; “What Vikram Pandit Knew, and When He Knew it.” The document itself was released recently by the the Financial Crisis Inquiry Commission. Read more

Aladdin’s synthetic CDO lawsuit

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Feb 01 2011 08:57 | Comment |

There are two nominations that go along with this post. One is for headline of the year; the other is the award for worst (synthetic) CDO ever made, quite possibly.

From Reuters on Tuesday: Read more

Desert(ing) CDS

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Dec 07 2010 12:17 | Comment |

The world of credit default swaps = one huge, amorphous, indefinable ocean of trillions worth of contracts, right?

How ’bout a dwindling, drying, puddle, instead? Read more

Goldman Sachs junk CDO trouble – again

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Nov 10 2010 12:43 | Comment |

Goldman Sachs must be getting tired of this.

The bank duly revealed it’s the subject of a(nother) class action lawsuit involving one of its Collateralised Debt Obligations (CDOs) in the 10-Q it filed on Tuesday — only to set-off another wave of reports — even though the court filing is old. Read more

Pyxified, Merrill’s subprime sink

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Aug 11 2010 08:15 | Comment |

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. Read more

The AIG e-mails, or, 250,000 pages of bail-out oddity

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jul 01 2010 08:30 | Comment |

Currently sweeping the blogosphere: 250,000 pages of AIG-related emails. FT Alphaville has skimmed off the most important — revealing a very odd legal waiver on mortgage securities during AIG’s bailout, as well as shedding light on the NY Fed’s relations with banks. Read more

Building a better Gaussian copula

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jun 25 2010 09:14 | Comment |

It’s ba-ack. The formula that famously felled Wall Street, the Gaussian copula, is being revamped to deal with its fatal flaw — the fat tail of correlated default risk, FT Alphaville writes. UniCredit’s Martin Krekel has been attempting to tweak the model for pricing distressed CDOs. Which is ambitious. And brave.  Read more

Goldman’s Hudson CDO – What lay beneath

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jun 10 2010 05:53 | Comment |

Savvy readers may have spotted some confusion over Goldman Sachs’ Hudson CDO.

Specifically on the subject of whether the bank used its own assets for the deal. Read more

In praise of synthetic CDOs (not)

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Jun 07 2010 16:54 | Comment |

Here’s an argument you rarely see ventured forth nowadays:

Synthetic CDOs were good for everybody… Read more