Fitch Ratings is working on a model to rate the coupon component of credit constant proportion portfolio insurance structures--the latest twist to hit structured credit. Until recently, the agency has only been required to rate the principal of these transactions, but the recent debut of a fully-rated CPPI (see story above) and inquires from other firms has prompted the development (DW, 7/21).
The formation of a rating model is not straight forward, says Alexandre Linden, analyst at Fitch in London. The model is sensitive to the spread assumptions used given the leverage in the CPPI structure. Linden said Fitch is liaising with a handful of firms on the work.
