Interesting Paper on CDO Tranche modelling

[Joy Pathak]

Using the criteria of the rating agencies, the authors tested how wide the AAA tranches created from residential mortgages can be. They found that the AAA ratings assigned to ABSs were not totally unreasonable but that the AAA ratings assigned to tranches of Mezz ABS CDOs cannot be justified.

John Hull gave a similar presentation as this paper at the last IAFE Conference. It was very interesting.