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http://www.ft.com/cms/s/0/bd15adc0-a...44feabdc0.html
By Aline van Duyn in New York
Published: September 22 2009 03:00 | Last updated: September 22 2009 03:00
By Aline van Duyn in New York
Published: September 22 2009 03:00 | Last updated: September 22 2009 03:00
Of the more than $500bn of CDOs backed by asset-backed securities that were sold in the boom, $350bn have experienced an "event of default".
The inability to sell or unwind complex securities such as CDOs - even at very low prices - was one of the prime problems of the financial crisis.
However, Morgan Stanley now estimates that about $123bn of defaulted asset-backed CDOs have been liquidated.
"For a long time it may have made sense for investors to liquidate CDOs, but this was not possible when there was no market for the underlying collateral," said Ed O'Connell, partner at Jones Day.
The recent rally has been particularly marked for CDOs backed by corporate bonds and loans. CDOs backed by mortgage assets have not rallied as much.
The inability to sell or unwind complex securities such as CDOs - even at very low prices - was one of the prime problems of the financial crisis.
However, Morgan Stanley now estimates that about $123bn of defaulted asset-backed CDOs have been liquidated.
"For a long time it may have made sense for investors to liquidate CDOs, but this was not possible when there was no market for the underlying collateral," said Ed O'Connell, partner at Jones Day.
The recent rally has been particularly marked for CDOs backed by corporate bonds and loans. CDOs backed by mortgage assets have not rallied as much.