Talk:Collateralized debt obligation/Archives/2016

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Second paragraph in the lead states: "As many CDO products are held on a mark to market basis, the paralysis in the credit markets and the collapse of liquidity in these products led to substantial write-downs in 2007."

Isn't it the other way around? Wasn't it the write-downs of the underlying mortgages that led to the collapse of the credit markets? Frappyjohn (talk) 01:16, 28 December 2008 (UTC)

Last four edits are from user Nile_Hef:

• short paragraph on 'Toxic Waste' and lawsuits following mis-selling allegations
• Software added S&P CDO toolkit
• Reference guides added recent articles in RISK and The Economist
• added 'loan contracts' to the basket components

Apologies for the anonymous edits, I seem to be having difficulty with 'persisting' my login in Opera - Nile

The section on the "subprime meltdown" is pretty loose with the facts and contains a number of unsupported statements. The one citation that is there is to a pretty shoddily written Fortune article and doesn't really support the statements it's supposed to support. Bond Head 00:15, 2 July 2007 (UTC)

Cayman Island trust statement should be referenced or explained. Who is watching this article? The guy should be shot

Is it a snipe at the Everquest incoporation in the Cayman Islands?

Would be nice if this page got into deeper technical detail. How does this really work? What is considered an asset and what is a liability within a CDO? —Preceding unsigned comment added by 64.47.152.254 (talk) 23:57, 28 November 2007 (UTC)

Well, basically, a CDO is just a bunch of mortgages that are packaged up, divided and sold like bonds. They are like coupon bonds (bonds which pay an amount each month and then the face value at the end). Because they indicate a positive cash flow, they are assets for their holders; they are liabilities for those making coupon payments. However, there is significant risk with these assets, and it appears that risk evaluation was a major contributor to the current financial crisis. Because banks did not calculate risk accurately and because there were adverse selection and moral hazard problems in the market (think Fannie and Freddie), CDOs were trading at prices much higher than they should have been. If people an banks had done even a little better job of assessing the risk of these assets, the current financial crisis would be much more mild. The mark-to-market rule didn't help matters, because banks' assets basically shed assets in real time. That's not to say mark-to-market is bad in all cases (mark-to-market prevents an Enron-like scandal), but I think regulators should think before making it the end-all in regulatory schemes. The bottom line is that we will always have financial crises because people will not learn the simple adage, "if it sounds too good to be true, it probably is." I can't say what will be the next bubble, but I am fairly sure it won't be housing or e-commerce... Andrew Elgert (talk) 06:36, 7 June 2009 (UTC)