Blame it on the euro. With currency plays and other European trading strategies no longer possible with the advent of a single currency, European banks and market participants were keen to latch onto something new.

As a result, Europeans have been the vanguard of the credit derivatives world. And now they have come up with a synthetic CDO that is doing for European bank balance sheets what securitizations, or cash-funded CDOs, have done in the U.S.

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