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Total Posts: 868
Joined: Sep 2004
Posted: 2007-05-04 16:40
That was only hours after Al Qaeda bombed Algiers. I thought he based his joke on this incident.

Pimp Co - Human Capital Management


Total Posts: 2864
Joined: Feb 2005
Posted: 2007-05-04 16:42
The picture is in fact from a report about the IRA, anyway, never mind.

"No trade with death / No trade with arms / Dispense the war / Learn from the past"


Total Posts: 868
Joined: Sep 2004
Posted: 2007-05-04 16:45
I think we are on the same page.... hug? :)

Pimp Co - Human Capital Management


Total Posts: 2864
Joined: Feb 2005
Posted: 2007-05-04 16:48
Only if you shaved properly this morning Tongue out.

"No trade with death / No trade with arms / Dispense the war / Learn from the past"


Total Posts: 424
Joined: Feb 2006
Posted: 2007-05-04 16:57
Thanks for the clarification.



Total Posts: 5
Joined: Jan 2007
Posted: 2007-05-05 09:32

Hey AMRO Only- Pls send the DBRS report at anandpriyankagmailcom

NP Wrestling Champion

Total Posts: 1181
Joined: Apr 2004
Posted: 2007-05-06 01:14
Cheng, thanks for the papers.

We are awakened with the axe, night of the living dead at last


Total Posts: 5
Joined: May 2007
Posted: 2007-05-07 11:19

DBRS Quantitative Research – CPDO Model Risk: Handle with Care

Date Of Release: April 18, 2007

New research by DBRS on constant proportion debt obligations (CPDOs) has revealed important findings on the issue of model risk.

The findings are published today in “CPDOs Laid Bare: Structure, Risk and Ratings Sensitivity,” a quantitative research report providing in-depth structural and risk analysis.

The research demonstrates the extent to which CPDO performance is highly sensitive to the choice of model and modelling parameters, with a corresponding impact on ratings. DBRS’s extensive tests show that credit spread parameters, particularly volatility, term structure and bid-offer spreads, have a significant impact on key risk measures, including probability of default (PD) and loss given-default (LGD). As a result, small changes to assumptions can, in some cases, cause the model-implied rating to vary from AAA to BBB.

CPDOs, while providing excess returns, have introduced significant volatility into credit markets. A widely expressed concern is the stability of AAA ratings assigned to early CPDOs that offered as much as 200 basis points (bp) over LIBOR. This highlights the importance of rating agencies’ role and DBRS thinks the ability to adequately assess both credit risk and market risk in the presence of a high degree of leverage is fundamental.

DBRS believes that CPDOs are an exciting addition to the structured credit market and they may offer more value than some investment alternatives in certain credit environments. However, due to the high level of model risk, DBRS takes a more conservative view than other agencies on the risk assessment of the static CPDOs that have so far been issued in the market.

Dr. Kai Gilkes, Managing Director, Structured Finance Quantitative Group, comments: Given the high sensitivity of CPDOs to modelling assumptions, taking a meaningful view of their investment risk cannot be done without also assessing future liquidity in credit markets. We have tested both optimistic and more conservative assumptions and found that, for example, under a bid-offer spread of 0.25 bp, a typical model-implied rating might be as high as AA. But this falls to BBB under a 1 bp assumption and even BB under a conservative assumption of 2 bp.”

Additionally, a detailed back-testing exercise reveals that, due to very high path dependence, the performance of CPDOs is very sensitive to timing of issuance and evolution of credit spreads. Over the last credit cycle, this would have led to high levels of volatility in net asset value (NAV) and model-implied ratings.

Dr Gilkes continues: “While we will take a conservative approach to rating CPDOs, we also think there is considerable potential for mitigating some risks in the second generation of CPDO structures. For example, managed CPDOs can reference well-diversified, bespoke portfolios and introduce structural features that allow for greater mark-to-market and ratings stability.”


Total Posts: 187
Joined: Mar 2007
Posted: 2008-07-02 00:07

To Customers of Moody’s Corporation:

I am writing to update you on the findings of our investigation into the European constant proportion debt obligations (CPDO) ratings process.

Moody’s found, based on an investigation conducted by the law firm Sullivan & Cromwell, that its personnel did not make changes to the methodology for rating European CPDOs to mask any model error.  Moody’s, however, has concluded that members of a European CPDO monitoring committee engaged in conduct contrary to Moody’s Code of Professional Conduct.  Specifically, some committee members considered factors inappropriate to the rating process when reviewing CPDO ratings following the discovery of the model error.  According to Moody’s Code of Professional Conduct, a committee may consider only credit factors relevant to the credit assessment and may not consider the potential impact on Moody’s, or on an issuer, an investor or other market participant.

The integrity of our ratings process is core to Moody’s values, and I am deeply disappointed by the conduct that occurred in this incident. 

We are taking appropriate actions to address the lapse in our rating process, including:

  • Initiating disciplinary proceedings
  • Reviewing existing CPDO ratings
  • Reviewing analytical models and methodologies
  • Strengthening our process for monitoring structured finance ratings
  • Expanding our global compliance function
  • Moody’s remains committed to the values of accuracy, integrity, and transparency. I can assure you that we will take every appropriate measure to ensure that a similar event does not occur again. 

    We encourage an open dialogue with our customers, and we welcome your feedback, questions, or concerns regarding this matter.

    Raymond W. McDaniel, Jr.
    Chairman and Chief Executive Officer









"First God, then man, horse, dog. Then women. Then rat."


Total Posts: 2333
Joined: Mar 2004
Posted: 2008-10-22 16:28
It's worth recording that Surf finally crashed against the rocks last week, effectively wiping out 'investors'.

How long will they kill our profits, While we stand aside and look? Some say it's just a part of it; We've got to remark the book.


Total Posts: 377
Joined: Mar 2005
Posted: 2019-02-25 23:56
@AndyM - you have in part answered the question I am about to ask:

How did CPDOs fair come their (intended) expiry?

I have to admit reading through these posts from the good old days was a bit of a blast. It reminded me of our desk chortles about Iceland, Moody's Joint Default analysis etc.

I was away from CPDOs doing cash/credit derivative prop back then although delved into CCDS. Re-marking a few illiquid CDS curves caused panic attendance at my desk on a few occasions by random functionaries on oddlot structuring desks.
Thankfully avoided capital structure arbitrage was about to dip my toe in by early 2007 but the need to have daily marked books was an obstacle given the products and systems. Oh how things change...

"Yeh, after that blow out I bid the bonds at 76 and you hit man...You're 77/81 now? Cool man...What? Do I care at 80? No mate... I'm 73 bid now...I'm sure you didn't just load up just for me...".


Total Posts: 2864
Joined: Feb 2005
Posted: 2019-02-27 08:36
Afaik none of these beasts survived, i.e. made it until expiry date. For the greater good of us all...

"He's man, he's a kid / Wanna bang with you / Headbanging man" (Grave Digger, Headbanging Man)
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