Correlation Models Flirt With Breaking Down

30 Nov 2007

Correlation models are threatening to break down as levels on super-senior index tranches approach quantitative limits.

Correlation models are threatening to break down as levels on super-senior index tranches approach quantitative limits. That could leave investors unable to mark to market and hedge their exposures. Standard models back out correlation based on portfolio price to a maximum of 100% and collapse if spreads imply ...

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