Credit Suisse First Boston is marketing an innovative repackaging of single-tranche CDOs in a deal called Cheyne Correlation CDO I. While the portfolio will be static, once ramped up, Cheyne Capital will be able to short the underlying credits as a way to manage the portfolio.

"The main innovation in this transaction is in the way the portfolio is hedged," said Marc Freydefont, a vice president and senior credit officer at Moody's Investors Service. "While the portfolio of single-tranche CDOs is static, the manager can dynamically short certain of the underlying credits with single-name credit default swaps."

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