Panelists expect ABX index tranching to begin within months. "There are still technical challenges," said Steven Kolyer, partner and head of the financial products group for Clifford Chance in New York. "But the size of the market dictates that the problems will be fixed."
Tranching is likely to happen within months, panelists said, noting that quasi-tranching is happening already. "This is a chance for people to get active before the stampede," said Joel Telpner, partner at Mayer, Brown, Rowe & Maw in New York. It's a chicken and egg situation: tranches are needed for traders to calculate correlation numbers, which in turn are needed to structure tranches. The process is starting with dealers structuring bespoke tranche trades for hedge funds and using those trades to hedge the correlation on other tranches.
