Margin call mondays!!! This should make the folks betting on stability start puking in their boots.
Mania up, and now depression down.
Anybody brave enough to buy some puts on China yet? Not me.
I figure that stability should start when the subprime is running about 12% yield post runoffs. That will obviously take a while from today's market conditions.
Fitch Ratings' derivatives unit on Friday said it may cut its ratings on some securities in debt products known as collateralized debt obligations because of exposure to deteriorating subprime loans.
Is anyone else starting to get the feeling that all this blame on Sub-Prime Mortgages is a little far fetched..kind of like a scape goat of sorts? IE: Fall Guy.
I mean the amount of leverage out there is crazy..so to blame this entire mess on the small Sub-prime Mortgage area just does not seem to Jive with me...Not when you have people buying CDO'S with 10% down and the rest is 90% borrowed..more to the mix than what we are being told for sure.
I thought the pre-2006 products were supposed to be "ok" - but the Fitch story refers to 2003 vintage loans.
This sounds really bad to me - am I missing something?
Abstract: The market for tranched credit products (CDOs, Itraxx tranches) is one of the fastest growing segments in the credit derivatives industry. However, some assumptions underlying the standard Gaussian onefactor pricing model (homogeneity, single factor, Normality), which is the pricing standard widely used in the industry, are probably too restrictive. In this paper we generalize the standard model by means of a two by two model (two factors and two asset classes). We assume two driving factors (business cycle and industry) with independent t-Student distributions, respectively, and we allow the model to distinguish among portfolio assets classes. In order to illustrate the estimation of the parameters of the model, an empirical application with Moody's data is also included.
If you just scan the document, you'll get an idea of how difficult this topic is.
Geez, are they really pricing this stuff with Normal distributions in Spain? Money to be made!!!
I thought they were rocket scientists, not high school stats folks. Oh wait, one can read far more complicated stuff out there than this academic treatise from Madrid. Pat where did you dig this total fossil up from? There was more advanced stuff than this when I was in grad school, over a decade ago, and it was required reading.
Go look at some of the papers backing up the Wilmont books. The we can at least talk the same language. N.T. is probably laughing his butt off today as it is...
Good, bad or indiferent, it's a 2007 paper. Since this isn't my area, I'm interested in guidance to material that will help me understand these things better. Any links?
anything by Nicolas Nassim Taleb
Specifically some of his papers and the book that he wrote the forward to late last year- quant heaven- the book is in my office and not handy, but find his webpage and go from there.
Is it possible to mark an asset to a different market?
I.E. could these hedge funds model the performance of these assets in such a way that they take on the value of Blackstone stock?
This could solve a lot of problems in the credit markets.
What is the combined market value?
what about alt-a ? and high-FICO neg-arm and option ARM ?
Nooooooooooooooooooooooo!!!!
How could they cut ratings on junk?
theroxylandr, the article doesn't say, but so far the downgrades have been just a small slice of the market.
We've been getting downgrades just about every Friday, so we might see some more this afternoon.
Best Wishes.
I wonder if the ratings will go negative and they'll pay people to hold the stuff? Or is Bear already doing that?
Margin call mondays!!! This should make the folks betting on stability start puking in their boots.
Mania up, and now depression down.
Anybody brave enough to buy some puts on China yet? Not me.
I figure that stability should start when the subprime is running about 12% yield post runoffs. That will obviously take a while from today's market conditions.
Someday this war's gonna end...
Subprime’s Newest Player: University Endowments? : HousingWire || financial news for the mortgage market
Fitch Ratings' derivatives unit on Friday said it may cut its ratings on some securities in debt products known as collateralized debt obligations because of exposure to deteriorating subprime loans.
Is anyone else starting to get the feeling that all this blame on Sub-Prime Mortgages is a little far fetched..kind of like a scape goat of sorts? IE: Fall Guy.
I mean the amount of leverage out there is crazy..so to blame this entire mess on the small Sub-prime Mortgage area just does not seem to Jive with me...Not when you have people buying CDO'S with 10% down and the rest is 90% borrowed..more to the mix than what we are being told for sure.
Not me either. Spent everything last week on shorts. No trades this week at all.
I thought the pre-2006 products were supposed to be "ok" - but the Fitch story refers to 2003 vintage loans.
This sounds really bad to me - am I missing something?
After all this murkiness, at last a bit of clarity (grin)....
PRICING TRANCHED CREDIT PRODUCTS WITH
GENERALIZED MULTIFACTOR MODELS *
http://e-archivo.uc3m.es:8080/dspace/bitstream/10016/720/1/wb0739091.pdf
Abstract: The market for tranched credit products (CDOs, Itraxx tranches) is one of the fastest growing segments in the credit derivatives industry. However, some assumptions underlying the standard Gaussian onefactor pricing model (homogeneity, single factor, Normality), which is the pricing standard widely used in the industry, are probably too restrictive. In this paper we generalize the standard model by means of a two by two model (two factors and two asset classes). We assume two driving factors (business cycle and industry) with independent t-Student distributions, respectively, and we allow the model to distinguish among portfolio assets classes. In order to illustrate the estimation of the parameters of the model, an empirical application with Moody's data is also included.
If you just scan the document, you'll get an idea of how difficult this topic is.
One hell of a friday that for sure..dollar down .41 atm and as a side note:
Yikes! Cash is king!
Geez, are they really pricing this stuff with Normal distributions in Spain? Money to be made!!!
I thought they were rocket scientists, not high school stats folks. Oh wait, one can read far more complicated stuff out there than this academic treatise from Madrid. Pat where did you dig this total fossil up from? There was more advanced stuff than this when I was in grad school, over a decade ago, and it was required reading.
Go look at some of the papers backing up the Wilmont books. The we can at least talk the same language. N.T. is probably laughing his butt off today as it is...
Someday this war's gonna end...
What is the combined market value?
According to ABSnet.net the "values" are
Trainer Wortham First Republic CBO III
304.00 mil
ACA ABS 2003-1
400.00 mil
ACA ABS 2003-2
725.00 mil
and Ipswich Street CDO
1,704.90 mil
Total value of all CDOs tracked by this service is 679 bil.
Unfortunately the access to details about these CDOs is restricted. Edgar search does not show any prospecti, either.
Mark down Fridays and margin call Mondays. Talk about taking all the fun out of the weekend.
bfatz - Yeah, maybe some of the "sub-prime" wasn't really all that sub.
calvert - Good point. I would've thought 2003 would have been a decent vintage.
allenm,
Good, bad or indiferent, it's a 2007 paper. Since this isn't my area, I'm interested in guidance to material that will help me understand these things better. Any links?
anything by Nicolas Nassim Taleb
Specifically some of his papers and the book that he wrote the forward to late last year- quant heaven- the book is in my office and not handy, but find his webpage and go from there.
allenm,
Thanks