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Criteria | Structured Finance | CDOs: Global Cash Flow And Synthetic CDO Criteria: Sizing Default Risk Mar 02 Product Image

Criteria | Structured Finance | CDOs: Global Cash Flow And Synthetic CDO Criteria: Sizing Default Risk Mar 02

  • Published: March 2002
  • Region: Global
  • Standard & Poors

Abstract
Analysts use various techniques to determine the potential loss characteristics of an asset pool in a structured financing. The analytical method may vary, depending on the size of the pool being examined. For example, the "weak-link" approach, which assumes the default of all assets rated lower than the structured financing, is often employed when the asset pool is comprised of a small number of credits. By contrast, an actuarial approach may be appropriate for extremely large asset pools that have relatively homogenous performance characteristics. Traditionally, analysts have used an obligor-specific approach when analyzing the small to medium-sized asset pools found in many CDO transactions. The obligor-specific asset analysis accounts for the distribution of any combination of potential obligor defaults that...

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