TY - JOUR T1 - Analytical Challenges in Secondary-Market CDO Trading JF - The Journal of Structured Finance SP - 54 LP - 68 DO - 10.3905/jsf.2004.426073 VL - 10 IS - 2 AU - Douglas J. Lucas AU - Laurie S Goodman AU - Frank J Fabozzi Y1 - 2004/07/31 UR - https://pm-research.com/content/10/2/54.abstract N2 - Secondary trading in the collateralized debt obligation (CDO) market came into its own in 2003 and has continued at a robust pace in 2004. One reason is the significant increase in resources available for analyzing outstanding CDOs, chiefly the availability of CDO-specific cash flow models. This article provides a step-by-step guide to evaluating a secondary CDO. The authors pay particular attention to two popular analytical methods: net asset value analysis and cash flow modeling. These two techniques have improved investors? understanding of CDOs and therefore secondary-market liquidity. The authors suggest a methodology to produce a range of constant annual default rates for the purpose of modeling structured-finance-backed CDOs and suggest some negotiating points for primary CDO purchasers to ensure the liquidity of their CDOs in the secondary market. ER -