Developments In Collateralized Debt Obligations
The fastest growing sector of the fixed income market is the
market for collateralized debt obligations (CDOs). Fostered by the
development of credit default swaps (CDS) on all types of indexes
of corporate bonds, emerging market bonds, commercial loans, and
structured products, new products are being introduced into this
market with incredible speed.
In order to keep up with this dynamic market and its various
instruments, you need a guide that provides you with the most
up-to-date information available. That's why Douglas Lucas, Laurie
Goodman, Frank Fabozzi, and Rebecca Manning have created
Developments in Collateralized Debt Obligations.
Filled with in-depth insights regarding new products, like
hybrid assets in ABS CDOs and trust preferred CDOs, and detailed
discussions on important issues-such as the impact of CDOs on
underlying collateral markets-this book will bring you completely
up to speed on essential developments in this field.
Written in a straightforward and accessible style,
Developments in Collateralized Debt Obligations will enhance
your understanding of this ever-evolving market-and its numerous
products.
Autorentext
DOUGLAS J. LUCAS is Executive Director at UBS and head of CDO research. He has an MBA from the University of Chicago.
LAURIE S. GOODMAN, PHD, is co-Head of Global Fixed Income Research at UBS. She holds a PhD in economics from Stanford University.
FRANK J. FABOZZI, PHD, CFA, is Professor in the Practice of Finance at Yale University's School of Management and the Editor of the Journal of Portfolio Management.
REBECCA J. MANNING is an Associate Director in the CDO Research Group at UBS. She holds an MBA from The Wharton School at the University of Pennsylvania.
Klappentext
Anyone familiar with collateralized debt obligations (CDOs) knows that change and innovation within the CDO market are increasing at a rapid rate—and will probably continue to do so for the foreseeable future. In order to keep up with this dynamic market and its various instruments, you need a guide that provides you with the most up-to-date information available. That's why Douglas Lucas, Laurie Goodman, Frank Fabozzi, and Rebecca Manning have collaborated to bring you Developments in Collateralized Debt Obligations.
Written in a clear and accessible style, this detailed follow-up to Collateralized Debt Obligations, Second Edition contains the latest insights regarding the evolving nature of the CDO market. In fact, a majority of the chapters in this book couldn't have been written one year ago, as their subjects simply did not exist.
Divided into four comprehensive parts, Developments in Collateralized Debt Obligations opens with an introductory section (Part One) that outlines the essential aspects of CDOs as well as the entire CDO market. Here, special attention is paid to the cash flow credit structure, credit rating agencies' methodologies, interest rate hedging, and CDO call features. After this brief review, you'll quickly move on to discover a wide range of new issues in this field through Part Two: Developments in Synthetic CDOs, Part Three: Emerging CDO Products, and Part Four: Other CDO Topics. Information addressed within these parts of the book includes:
- The use of both cash and synthetic assets in the same CDO's collateral portfolio
- A comparison of subprime mortgage collateral in cash, credit default swap, and index forms
- An explanation of credit default swaps referencing CDOs
- CDO ratings and rating methodology changes made in 2006
- The growing influence CDOs have upon their underlying collateral markets
- Trust preferred securities issued by banks, insurance companies, and REITs
- Commercial real estate and commercial real estate CDOs
Whether you're an investment manager or institutional investor, understanding CDOs and handling their inherent complexities is more important than ever before. With Developments in Collateralized Debt Obligations as your guide, you'll learn how to navigate this dynamic market and take advantage of the many opportunities its products have to offer.
Zusammenfassung
Developments In Collateralized Debt Obligations
The fastest growing sector of the fixed income market is the market for collateralized debt obligations (CDOs). Fostered by the development of credit default swaps (CDS) on all types of indexes of corporate bonds, emerging market bonds, commercial loans, and structured products, new products are being introduced into this market with incredible speed.
In order to keep up with this dynamic market and its various instruments, you need a guide that provides you with the most up-to-date information available. That's why Douglas Lucas, Laurie Goodman, Frank Fabozzi, and Rebecca Manning have created Developments in Collateralized Debt Obligations.
Filled with in-depth insights regarding new products, like hybrid assets in ABS CDOs and trust preferred CDOs, and detailed discussions on important issues-such as the impact of CDOs on underlying collateral markets-this book will bring you completely up to speed on essential developments in this field.
Written in a straightforward and accessible style, Developments in Collateralized Debt Obligations will enhance your understanding of this ever-evolving market-and its numerous products.
Inhalt
Preface xi
About the Authors xv
Part One Introduction 1
Chapter 1 Review of Collateralized Debt Obligations 3
Understanding CDOs 3
Cash Flow CDOs 10
Synthetic Arbitrage CDOs 28
Conclusion 37
Chapter 2 Impact of CDOs on Collateral Markets 39
Collateralized Loan Obligations and the High-Yield Bank Loan Market 39
Structured Finance CDOs and the Mezzanine Mortgage ABS Market 42
Trust Preferred Securities CDOs and their Collateral Market 46
Conclusion 48
Chapter 3 CDO Rating Experience 49
CDO Rating Downgrade Data 50
CDO and Tranche Rating Downgrade Frequency 52
CDO Downgrade Patterns 54
Why Downgrade Patterns? 56
Downgrade Severity 58
Extreme Rating Downgrades 58
CDO Defaults and Near Defaults 61
Summary 71
Part Two Developments in Synthetic CDOs 73
Chapter 4 ABS CDO Collateral Choices: Cash, ABCDS, and the ABX 75
Growth of the Subprime Synthetic Market 75
Importance of ABCDS to CDO Managers 76
ABCDS 79
The ABX Index 82
Fundamental Contractual DifferencesSingle-Name ABCDS/ABX Index/Cash 83
Supply/Demand Technicals 89
What Keeps the Arbitrage From Going Away? 92
Bottom LineBuyers versus Sellers 94
The Cash/ABCDS Basis and the CDO Arbitrage 94
Single-Name ABCDS versus ABX in CDOs 96
Summary 97
Chapter 5 Hybrid Assets in an ABS CDO 99
Corporate CDS and ABCDS 100
Advantages of Hybrid Assets in an ABS CDO 103
Illustrative Hybrid ABS CDO Structure 105
Cash Flow Challenges 107
Conclusions 115
Chapter 6 Synthetic CDO Ratings 117
Tests of Index Portfolios 117
AAA Ratings and Expected Loss versus Default Probability 120
Barbell Portfolios 121
Summary 122
Chapter 7 Credit Default Swaps on CDOs 125
CDO CDS Nomenclature 126
CDO Credit Problems and their Consequences 127
Alternative Interest Cap Options 130
Miscellaneous Terms 133
Cash CDO versus CDO CDS 134
Exiting a CDO CDS 135
Rating Agency Concerns on CDOs that S…