About the Authors.

PART ONE Introduction.

CHAPTER 1 Review of Collateralized Debt Obligations.

Understanding CDOs.

Cash Flow CDOs.

Synthetic Arbitrage CDOs.

Conclusion.

CHAPTER 2 Impact of CDOs on Collateral Markets.

Collateralized Loan Obligations and the High-Yield Bank Loan Market.

Structured Finance CDOs and the Mezzanine Mortgage ABS Market.

Trust Preferred Securities CDOs and their Collateral Market.

Conclusion.

CHAPTER 3 CDO Rating Experience.

CDO Rating Downgrade Data.

CDO and Tranche Rating Downgrade Frequency.

CDO Downgrade Patterns.

Why Downgrade Patterns?

Downgrade Severity.

Extreme Rating Downgrades.

CDO “Defaults” and Near “Defaults”.

Summary.

PART TWO Developments in Synthetic CDOs.

CHAPTER 4 ABS CDO Collateral Choices: Cash, ABCDS, and the ABX.

Growth of the Subprime Synthetic Market.

Importance of ABCDS to CDO Managers.

ABCDS.

The ABX Index.

Fundamental Contractual Differences—Single-Name ABCDS/ABX Index/Cash.

Supply/Demand Technicals.

What Keeps the Arbitrage From Going Away?

Bottom Line—Buyers versus Sellers.

The Cash/ABCDS Basis and the CDO Arbitrage.

Single-Name ABCDS versus ABX in CDOs.

Summary.

CHAPTER 5 Hybrid Assets in an ABS CDO.

Corporate CDS and ABCDS.

Advantages of Hybrid Assets in an ABS CDO.

Illustrative Hybrid ABS CDO Structure.

Cash Flow Challenges.

Conclusions.

CHAPTER 6 Synthetic CDO Ratings.

Tests of Index Portfolios.

AAA Ratings and Expected Loss versus Default Probability.

Barbell Portfolios.

Summary.

CHAPTER 7 Credit Default Swaps on CDOs.

CDO CDS Nomenclature.

CDO Credit Problems and their Consequences.

Alternative Interest Cap Options.

Miscellaneous Terms.

Cash CDO versus CDO CDS.

Exiting a CDO CDS.

Rating Agency Concerns on CDOs that Sell Protection via CDO CDS.

Summary.

PART THREE Emerging CDO Products.

CHAPTER 8 Trust-Preferred CDOs.

Trust-Preferred Securities.

Other TruPS CDO Assets.

TruPS CDO Issuance.

Bank TruPS Prepayments and New CDO Issuance.

TruPS CDO Structure.

Assumptions Used by Rating Agencies.

TruPS CDO Performance.

TruPS Issuers and Issues.

Summary.

CHAPTER 9 Commercial Real Estate Primer.

Loan Origination.

Property-Level Loans.

Commercial Mortgage-Backed Securities.

REIT Securities.

Evaluating CREL and CMBS.

CREL Historical Performance.

CMBS Historical Performance.

Summary.

CHAPTER 10 Commercial Real Estate CDOs.

CRE CDO Defined.

Market Trends.

CRE Finance before CDOs.

Types of CRE CDOs.

CRE CDO Performance.

Investors.

CRE CDO Credit Analysis.

Rating CRE CDOs.

Summary.

CHAPTER 11 CRE CDO Relative Value Methodology.

Whole Loan CREL CDOs versus High-Yield CLOs.

Investment-Grade CMBS CDOs versus Mezzanine Structured Finance CDOs.

Relative Value among CRE CDOs.

Summary.

PART FOUR Other CDO Topics.

CHAPTER 12 Rating Agency Research on CDOs.

Using Rating Watches and Outlooks to Improve the Default Prediction Power of Ratings.

Changes in Rating Methodologies.

Conclusions.

CHAPTER 13 Collateral Overlap and Single-Name Exposure in CLO Portfolios.

Collateral Overlap in U.S. CLOs.

Favorite CLO Credits.

Single-Name Risk and Tranche Protections.

Excess Overcollateralization and Excess Overcollateralization Delta.

Summary.

Index.