CLOs pool loans and slice them into securities of varying risk intended to provide higher returns than similarly-rated investments.-- via Bloomberg CLOs to End 12-Month Drought in Citigroup Deal
Uhm. This is what is wrong with everyone. Have these people never heard of conservation of probability? Slicing and dicing loans doesn't improve the quality of the underlying, it just redistributes risk across tranches and security holders to reduce the variance. Without so much as touching on David Merkel's great point about lower quality in originate-to-securitize loans, the overhead needed to securitize these loans effectively reduces the aggregate return on the whole pool as well as lower the probability adjusted return of the pool.
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ReplyDeleteFrom the article, one gains a rich understanding of securitized loans and should be well-equipped to understand the dynamics and advantages of such financial tool. One also finds it rather interesting to understand how these loans are packaged and sold as securities to help lenders achieve increased liquidity. Furthermore, there is always some value in delving into the details of securitized loans, and as for everyone who is interested in finance or even aims at depicting some unique graphic design thesis topics.s, the idea of forming the graphic representation of such data can be useful indeed.
ReplyDeleteCollateralized Loan Obligations (CLOs) pool together loans, typically corporate loans, and then divide them into different securities, each with varying levels of risk and return. Investors can choose tranches based on their risk appetite, with higher-risk tranches offering the potential for greater returns compared to similarly-rated investments. I have a strong passion for photography and technology, with a keen interest in improving healthcare through medical equipment advancements like Mobility Scooters
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