The case introduces students to the nature of the collateralized debt obligations (CDOs) and CDO creation process, focusing on the corporate structure of the SPEs cash flows to various tranches of CDO and CDO motivation behind the development. Students learn to quantitatively evaluate the risk-return profile of CDO tranches with emphasis on the equity tranche (also known as “toxic waste” means). This is ideal for MBA and advanced undergraduate level courses on financial mark … Read more »

The case introduces students to the nature of the collateralized debt obligations (CDOs) and CDO creation process, focusing on the corporate structure of the SPEs cash flows to various tranches of CDO and CDO motivation behind the development. Students learn to quantitatively evaluate the risk-return profile of CDO tranches with emphasis on the equity tranche (also known as “toxic waste” means). This is ideal for advanced undergraduate and MBA courses in the financial markets, financial institutions, and investments. In the case prepares a fellow at the Debt Capital Markets desk of Lehman Brothers, a CDO issues for Western Asset. Western Asset was to sell a group of commercial banks’ senior secured bank loans and high-yield corporate bonds, its capital requirements and capital were free to reduce contacted for additional credit.
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from
Elena Loutskina,
Rahul Prahbu
Source: Darden School of Business
19 pages.
Release Date: 23 April 2009. Prod #: UV2540-PDF-ENG
Western Asset arbitrage HBR case solution

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