TIPS

• Be aware of the rise (and recent fall) in securitisation and credit derivatives Debt can be packaged and resold as Mortgage Backed Securities (MBS), these can then be chopped up into different “tranches” of risk known as Collateralised Debt Obligations (CDO), the holder of the CDO can then use a credit default swap (CDS) to transfer that risk onwards. Risk can be packaged, repackaged and transferred – but does not disappear, as the global financial crises has
shown (although quality press such as “The Economist” had been warning for many years of the dangers of securitisation and credit derivatives, particularly when combined with a property bubble).

Hi Sir,

CAn you please throw some more light on the above so that if it comes up i will have something to write on.

Regards