Market weighs XO as hedge for CLOs

By Dan Alderson
03 Sep 2015

The touting of Crossover tranches as a hedge for CLO investments has prompted debate in the market, with some seeing the instrument as adding a useful tool while others remain sceptical.

Bank of America Merrill Lynch this week proposed the strategy, saying that Crossover tranches can be a useful tool for CLO investors to reduce risk. Replacement risk can be high for CLOs, said strategists at the bank, who also pointed out that demand for higher yielding assets ...

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