2 years ago
How is the history of the Abacus CDO?
You can leave an optional "tip" with Mahalo's virtual currency, Mahalo Dollars. If you are asking a difficult question that might require some research, or if you'd like a wide variety of feedback, a higher tip often leads to more answers to your question.
M$1 Answer
Based on reports by Matthew Philips of newsweek.com, it was reported that "Abacus is what's known as a synthetic collateralized debt obligation.....They are "collateralized" in that they are backed by loans, bonds, or other real assets....bankers hit on the idea of the synthetic CDO, basically a bundle of credit default swaps (or insurance contracts) that mimic, or reference, the performance of real bonds. By 2005, the CDO market in the U.S. hit $200 billion, twice the 2004 level. By then, housing prices were sky-high and the Fed had begun raising interest rates."
images:
You can leave an optional "tip" with Mahalo's virtual currency, Mahalo Dollars. If you are asking a difficult question that might require some research, or if you'd like a wide variety of feedback, a higher tip often leads to more answers to your question.
M$
CDS are only as good as the party ability fund on CDS contract required payout. If the CDS is bought and sold like a financial device, the person holding the CDS contract bundle at the time of payout may not be financial capable, increasing risk and premiums on the CDS.
The synthetic financial device is likely to be rated downward causing massive write-offs on possessors of these financial devices. The damage of collateralizing may be far worst than I've described considering the hidden complexity and nature of rise of speculative bond debt. It is expect that speculative bond debt will reach 45% with junk bonds ruling supreme. The past will repeat and CDS instability will cause big problems.