On Rating Cash Flow CDO's using the BET Technique
by Joćo Garcia of Dexia Group,
October 8, 2004
Abstract: This paper begins with a short explanation of what collateralized debt instruments (CDO's) are and how investors might use them. We give detailed descriptions of the waterfall and the binomial expansion technique (BET) first proposed by developed by Moody's. We then test how the model parameters affect the rating of the different tranches of a real contract (a cash flow CDO).
Keywords: Collateralised Debt Obligation, BET, Cash flow CDO, Rating Structured deals.