RECIPE FOR ATOMIC CDO (Collateralized Debt Obligation) : –(Should be done approximately 18 months ahead of time and stored in freezer) Collect hundreds mortgage loans to borrowers with poor credit histories, subprime ideally –Drop them in box, stir vigorously: call this a residential mortgage bond - set aside and sell to investors –Gather short investor keen on making a big bet on house prices declining and borrowers defaulting on loans – Pluck through mortgage bonds (toss out bad, or good, seeds depending on whether investor is short or long) and collect fees for the work –Drop bonds in box. Cover, refrigerate, Let rise. – Sell the biggest and strongest slices off to large institutional investors around world. – Find insurer to sell protection to investors, guaranteeing. payments if the loans underlying the bonds default. – Let short investor lick bowl. – Short it yourself if you can, before guests arrive. Read more: blogs.wsj/moneybeat/2013/07/17/fabulous-fab-trial-how-to-create-a-synthetic-cdo/
Posted on: Thu, 18 Jul 2013 12:15:19 +0000
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