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Or he might take some shortcuts, and simply rely on the deal's stellar ratings.
The most senior tranches of the CDO, comprising 70% of the capital structure, were rated AAA.
The bottom 10% of the capital structure-- million in equity plus million in bonds rated BBB--would be funded by Goldman itself.
The other 90% of the deal was marketed to outsiders, who bought tranches in the deal rated AAA, AA and A.
On March 20, 2007, the market value of the mortgage securities was about 70% of par, or 70 cents on the dollar.
Since the beginning of 2006, the valuations of subprime mortgage securities had been benchmarked against a market index known as the ABX.
It receives fees for insuring certain identifiable risks, and, whenever called upon to pay out on an insured claim, it will liquidate part of the investment portfolio.The BBB tranche of the ABX had not traded at par since November 2006.At the end of March 2007, the BBB and BBB- tranches of the ABX traded in the range of around 70.That claim, from Goldman's letter to its shareholders, is easily refuted. lays out its blueprint in sufficient detail so that we can pinpoint how and why this transaction's failure was never in doubt. While most of these deals remain shrouded in secrecy, one of them, Anderson Mezzanine Funding 2007, Ltd.