Credit Crunch
The sudden widening of credit spreads that occurred in 2007 and 2008 as a result of the credit crunch caused considerable losses to the net asset value of many CPDOs. The rating agencies that had entered the CPDO rating business have downgrades many of them and some have already defaulted.
The failures of these highly rated notes has been used by critics in criticisms of the rating agencies, although not all agencies have rated them and some agencies had provided the market with early pre-crisis warnings.
Read more about this topic: Constant Proportion Debt Obligation
Famous quotes containing the word credit:
“Truth lives, in fact, for the most part on a credit system. Our thoughts and beliefs ‘pass,’ so long as nothing challenges them, just as bank-notes pass so long as nobody refuses them.”
—William James (1842–1910)