Systemic Risk : Correlation at New High

Here we go:
Correlation on the five-year investment-grade Markit iTraxx Europe index - a measure of investor fears of a system-wide crash - reached new highs of 45 percent today.
Correlation sets a price on the market’s fear that a few bad apples will default versus its fear of an economic cataclysm.
The pricing is based on portfolios of credits, such as collateralised debt obligations (CDOs), which have been divided into tranches based on different degrees of default risk.
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Original Source

  12 February, 2008| Economy | @ 22:07

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