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AAA tranche of securitized is not the same as bonds from AAA companies
Some old articles I am yet to read. I am using this post as a place holder to come back and read later. In the meantime, feel free to read the articles and discuss.
There are only 2 US companies with genuine AAA ratings - JNJ, MSFT.
Securitized credit AAA is a manufactured rating. So, the underlying pool may have only A or BBB or BB rating. It is sliced-and-diced into tranches that are rated AAA, AA, A, BBB,....,C and equity, based on the assumptions of how income from the pool is prioritized and distributed. But things can go wrong with models and assumptions. There are also bad players - although there are some clawbacks possible, and the sponsors have to retain some exposure.
That is a great movie clip. It also introduces the CDS (nothing to do with CDs) that really blew up and tanked AIG, etc during the GFC. The Feds had to come to the rescue of these insurance companies and/or banks to the tune of hundreds of billions of Dollars.
That is a great movie clip. It also introduces the CDS (nothing to do with CDs) that really blew up and tanked AIG, etc during the GFC. The Feds had to come to the rescue of these insurance companies and/or banks to the tune of hundreds of billions of Dollars.
Love the movie. And the various cameos were great in explaining complex issues to the masses in a satirical/snarky way -- Richard Thayler, Anthony Bourdain, Selena Gomez, Margot Robbie, etc. There were so many good tidbits in this film.
(I was on a finp0rn kick the other week, rewatching Big Short, Margin Call (excellent!), Too Big To Fail, etc.) Jeremy Iron's CEO boardroom scene in Margin Call was absolutely brilliant.
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Securitized credit AAA is a manufactured rating. So, the underlying pool may have only A or BBB or BB rating. It is sliced-and-diced into tranches that are rated AAA, AA, A, BBB,....,C and equity, based on the assumptions of how income from the pool is prioritized and distributed. But things can go wrong with models and assumptions. There are also bad players - although there are some clawbacks possible, and the sponsors have to retain some exposure.
Add "Bond Factory - Structured Credits" to your reading list,
https://ybbpersonalfinance.proboards.com/thread/90/bond-factory-structured-credits
(I was on a finp0rn kick the other week, rewatching Big Short, Margin Call (excellent!), Too Big To Fail, etc.) Jeremy Iron's CEO boardroom scene in Margin Call was absolutely brilliant.