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What is clear is that MBIA's insured portfolio has performed worse than MBIA thought could possibly happen — and that the bad news keeps coming.
"We are aggressively managing our mortgage-related exposures and have made demonstrable progress in reducing the risk in our insured portfolio," Mr. Callen said.
Almost our entire insured portfolio is rated directly at the transactional level by Moody's and S&P – while only about 30percentt of our issuers choose Fitch to do credit analysis at that level.
Models typically contain catalogues of numerically simulated hazard events with associated probabilities that are combined with vulnerability functions and insured portfolio information to calculate loss statistics.
Moody's also raised concerns about deterioration in MBIA's insured portfolio, given deterioration in mortgage performance data, particularly home equity and asset-backed collateralized debt obligations.
MBIA disagreed with Ftich's conclusions, citing its strong balance sheet with over $17 billion in claims-paying resources and a high-quality insured portfolio.
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The U.S. has already insured portfolios at Citigroup and Bank of America and is set to perform "stress tests" on major banks.
Although it is a safe bet that they will calm down so banks' losses may end up rather smaller the experience will have put up sharply the price of insuring portfolios by buying new options from others.In the short term the biggest worry is the money that banks have risked punting their own capital.
An all-Ambac or all-MBIA insured bond portfolio defeats the purpose of diversification.
The F.H.A. insures a portfolio of more than $1 trillion in mortgages.
As John Ralfe, an investment consultant, has pointed out, it is possible to insure a portfolio against a stockmarket decline via the options market.
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