What are peoples opinions on using tranches in the securitization of the banks debt? That is to say there are four types of securities created on the short position. The first absorbs the first 25% of losses. The second absorbs the next 25%, the third the next and the most senior security bears the least amount of risk, only losing value if the collateral loses more than 75% of its value. While this might not be necessary on the most highly demanded assets, the more obscure derivative markets might benefit from this approach.
Topic: Four tranche CDO (Read 1124 times)
