MR. HAYES had been sold the riskiest piece of the loan pool, known as the equity or E tranche.
And it was: the French community of New York, or a tranche of it, had come out on Wednesday to hear President Nicolas Sarkozy address them on the occasion of his visit to New York.
So if you had a 3% or 4% default in an issue or 3% or 4% loss, that tranche would be totally wiped out.
The finance ministers have given Greece until tomorrow to request an extension to their €240bn (£176bailoutlout programme, or the last tranche of money will be withheld and Greece will not be able to pay debts in the coming months.
All they needed was that correlation number, and out would come a rating telling them how safe or risky the tranche was.It's a must read.Brad Setser looks at the relationship between Abu Dhabi and Dubai, and explains why the former is using the UAE to bail out the latter, rather than doing it directly.
It could be scallops roasted in the shell with garlic and white port, or red mullet cured with fennel and blood orange; it could be the deepest, richest and punchiest of fish stews, full of shells to be sucked at, or a prime tranche of turbot grilled over the fire and served with a frothy hollandaise.
The current crisis has demonstrated that neither bank regulators, nor anyone else, can consistently and accurately forecast whether, for example, subprime mortgages will turn toxic, or to what degree, or whether a particular tranche of a collateralized debt obligation will default, or even if the financial system as a whole will seize up.
"The real lesson here appears to be that bank regulators cannot fully or accurately forecast whether, for example, subprime mortgages will turn toxic or whether a particular tranche of a collateralized debt obligation will default, or even if the financial system will seize up," he said in a speech last week to the Economic Club of New York.
If, or when, the B4 tranche folded into Nautilus I collapses, the next tranche in the CWALT trust to absorb losses will be B3.
If a trader bought or retained an AAA tranche of a CDO and hedged it (at some banks in full, in others, merely in part), the difference between the income on the CDO and the cost of the hedge over the life of the trade was discounted and included in the trader's P&L.
