Abstract
Similarly rated tranches are not created equal. Among other things, some tranches have better recovery potential than others. Investors who rely on rating agency look-up tables to estimate recovery rates for structured credit products may over-or underestimate recovery values. This is particularly true for managers of CDO-Squared or ABS CDO transactions. We propose the Two Tranche Method (TTM) as a way for investors to quickly estimate CDO tranche recovery rates.
- © 2005 Pageant Media Ltd
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The Two-Tranche Method of Estimating CDO Recovery Rates
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