Subsequently, they apply the BSDE approach to unilateral valuation of a collateralized European claim with bilateral default risk.
A whistle-blower — Eric Kolchinsky, a former Moody's executive who oversaw the firm's collateralized debt obligation ratings — claimed that Moody's inflated ratings on a loan deal called Nine Grade Funding in January 2008 because it had already made a decision that it was going to downgrade the assets that were going into the deal.
In Tuesday's filing, S.& P. estimated that more than $4.6 billion of the losses it claims might have resulted from collateralized debt obligations that were structured, marketed or sold by Bank of America or Citigroup.
Silbert is the creator of SecondMarket, an electronic exchange that lists $30 billion worth of tough-to-trade assets, including restricted shares in public companies, collateralized debt obligations, auction-rate securities and bankruptcy claims.
In one year, he earned more than $3 million in commissions selling a form of collateralized debt obligations known as "inverse floaters" to individual investors who claim he never warned them of the risks.
The question has taken on new urgency now that Citigroup has agreed to pay $75 million to settle S.E.C. claims that it misled investors about its exposure to collateralized debt obligations, or C.D.O.'s.
Judge Stein let the plaintiffs pursue claims that Citigroup failed to properly disclose exposure to $66 billion of collateralized debt obligations backed by subprime mortgages and did not reserve enough for residential mortgage losses.
The bank agreed to pay $285 million to settle claims by the Securities and Exchange Commission that it had misled investors about a $1 billion collateralized debt obligation tied to the American housing market in which the bank bet against investors.
The former chief investment officer of New Mexico's Education Retirement Board claims that the board lost $90 million by investing in subprime mortgages and collateralized debt obligations.
| Intesa Sanpaolo sued Crédit Agricole and the hedge fund Magnetar Capital, claiming a unit of the French bank fraudulently induced it to buy a collateralized debt obligation that Magnetar designed, Bloomberg News reports.
