A paper released today from the Bank of International Settlement's (BIS) Joint Forum with IOSCO and the IAIS entitled "Credit Risk Transfer - Developments from 2005 to 2007" predicts that the market for asset-backed CDOs will "disappear". The paper finds that an institutional failure to fully understand the complexity of the instruments was the major factor in the turmoil that has bedevilled the financial world since the onset of the credit crunch.

The main points of the paper are summarised below:

• Some of the more complex CRT instruments developed since 2004 are associated with increased leverage and - in the case of certain tranches of structured finance products - a high variance of loss or high vulnerability to the business cycle. This increased complexity, combined with a more diffuse investor base (including participants that are only recent entrants to the CRT markets), means that some investors may not ...   more »

Press Release  - New York, July 31, 2008: Julius Finance, the leaders in model fusion for the $58 trillion dollar credit derivatives market, today announced that due to market demand it has launched an independent valuation service for a range of credit derivatives including bespoke synthetic Credit Derivative Obligations (CDOs), CDO2 (CDO squared), CDO3 (CDO cubed), CPPIs, CPDOs, CDPCs and CDSs. The valuation service makes use of Julius Finance’s breakthrough research in model fusion which is uniquely able to price such securities by taking account of all market available information through a next generation unified credit model.
 
With billions of dollars of CDO write downs, investor demand for independent valuation of complex financial instruments has rapidly increased. Julius Finances’ breakthrough comes at an opportune moment.
 
Julius’s technology provides unprecedented visibility for market derived pricing and analytics. The service is designed for bespoke valuation, risk management, catastrophic risk analysis, ...   more »