Rating agencies have always had different views of asset correlation assumptions, so when it comes to rating synthetic CDOs, methodologies vary so widely investors have felt less than concrete with the guidance given.

Default correlation, a measure of how credits in a portfolio perform together, appears to be a sticky point. As a result of varying correlation assessments, Fitch Ratings, Moody's Investor's Service and Standard & Poor's all have different attachment points when rating synthetic CDOs. Despite the various opinions, fueled by the tight spread environment, synthetic CDOs are rising in popularity; it seems each quarter, investors face an onslaught of new CDO-of-CDOs, for example.

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