derives_40.pdf - 398 COMMERCIAL REAL ESTATE ceived by the...

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398COMMERCIAL REAL ESTATEceived by the protected party on the reference portfolio, and the sale or re-moval of mortgage loans from the reference portfolio.The CDS will require the issuer to reimburse the party buying protec-tion for realized losses on the reference portfolio in each month prior to the allocation of principal to the offered notes. Realized losses reimbursed under the CDS will be allocated to the offered notes in reverse order of pay-ment priority until their principal balances have either been reduced to zero or are fully impaired.SBSCDOs can enable or allow the origination arm of the business to run at full capacity without limitations on geography or loan size as excess exposures can be reduced or removed synthetically. INVESTOR’S GUIDE TO SYNTHETIC CDOsThere are a myriad of investment considerations in connection with CDO investments in general, and SCDOs are no different. However, the emphasis may be different when looking at a synthetic transaction, and we suggest the following considerations be included in an investor’s due diligence process in addition to their typical CDO due diligence process:Reference portfolio and parameters: quality is keyPortfolio manager: skills and capabilitiesEvent risk: proper modelingAdditional layer of risk: considering the high-quality assets

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Term
Fall
Professor
N/A
Tags
Portfolio Manager, Collateralized debt obligation, Credit derivative, SCDOs

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