Standard & Poor's announced the launch of the latest version of its CDO modeling tool, called CDO Evaluator Version 3.2. The new version modifies the default assumptions used for structured finance assets and includes an expanded list of structured finance asset types.
The new ABS table makes minor adjustments to the slope of the assumed default curve, bringing the assumptions closer to the actual default experience of structured finance assets. Although there will be no changes to the existing ratings, it is important to note that the changes to the ABS table result in a slight increase in the assumed default rates for investment grade structured finance assets and a decrease in the assumed default rates for speculative grade assets.
Among other revisions is the modification of the corporate bond recovery rate table that is included in the evaluator for a number of European countries.
As for global synthetic transactions, the newest tool will be used in conjunction with the pervious version until the transition period ends on July 15. The transition of the new model for use in cash CDOs and synthetic CDOs with cash flow applications will occur at a later date, according to S&P.
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