no, It would be possible however the only splitting up in tiers was in the junior/equity tranche as these are the ones which carried the most risk and thus the most profit.
When you increase correlation, you are increasing the probability of having very large losses, as well as the probability of having no loss at all. So, you are increasing the probability that senior tranches might experience significant losses but also the probability that the equity tranche is left untouched. As a consequance the spread on the latter decreases.
While compound correlation is the correlation found by calibrating the Gaussian copula model to the price of a CDO tranche (for example 3-6%), base correlation is found by calibrating to the price of a first loss tranche, i.e. to the sum of all tranches up to an attachment point (for example 0-6%, the sum of 0-3% and 3-6%). The curve of correlations obtained by calibrating to first loss tranches turns out to be much smoother and more stable than that obtained by calibrating to plain tranches.
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A CDO is a collateralized debt obligation, a security whose principal and interest are repaid by the cash flows generated by a portfolio of assets (usually loans and bonds). The portfolio of assets is the collateral and it is usually in the balance sheet of a separate entity, called special purpose vehicle, which has the CDO as its only liability and the assets in the portfolio as its only assets. ABS CDO is a CDO whose portfolio is comprised of ABS (asset backed securities). A CDO is subject to credit risk, because some of the assets in the portfolio might not generate the expected cash flows (when the underlying credits go into default). Often, the CDO is tranched in tranches of different seniority, which have different priority in absorbing the eventual losses. The equity tranche, the less senior, absorbs the first losses (if there are any). Then comes the mezzanine. Finally come the senior tranches.
1. Its the likelihood of a domino effect occurring within a tranche of a CDO. If all the companies in a CDO are in the automobile industry, and one begins to fail and therefore is unable pay its debts, there is a good chance that it might be something in the automobile industry that is causing these companies to falter. Therefore if on company fails, the probability of others failing increases.
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owner of cdo
=who are the CDO city officials 2009?....=
Corazon D. Havier is the owner of CDO.. hope it can help :))
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