Comments on: Loss Severity Leverage http://alephblog.com/2009/06/10/loss-severity-leverage/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Tue, 16 Mar 2010 21:21:52 -0400 http://wordpress.org/?v=2.8.4 hourly 1 By: q http://alephblog.com/2009/06/10/loss-severity-leverage/comment-page-1/#comment-21955 q Thu, 11 Jun 2009 17:38:18 +0000 http://alephblog.com/?p=1805#comment-21955 yes, this is something i've been wondering about and which hasn't been covered much. what was/will be the extent of miscalculations of the loss rates of mezzanine tranches of securitized products, and who bought and held these products? the structured credit models, even if they *might* do a good job on supersenior or equity tranches are pretty poorly equipped to handle mezzanine tranche pricing -- and as you said the additional premium for taking this risk was quite small. yes, this is something i’ve been wondering about and which hasn’t been covered much.

what was/will be the extent of miscalculations of the loss rates of mezzanine tranches of securitized products, and who bought and held these products?

the structured credit models, even if they *might* do a good job on supersenior or equity tranches are pretty poorly equipped to handle mezzanine tranche pricing — and as you said the additional premium for taking this risk was quite small.

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