This is an article on today's Financial Times. I'm amazed that people can be so creative when it comes to securitization. Look at this -- "Among the more unusual assets to be used as collateral are pop artists' royalty payments, including thos of David Bowei, James Brown and Isley Brothers". Last summer, I learned similar things from a conversation with someone in JPM that ABS can be structured on intellectual properties. That's what I like about structured finance. You can come up with the most complicated products you can think of. Nonetheless, risk shouldn't be forgotten. Never. Accoriding to the global market opinion survy by Standard & Poor's, among the top three risks, "traditional credit risk was first, with 79%, ahead of legal risk in thrid palace with 40%". Also, "concerns about operational risk were often linked to the servicer managin the cash flows involved int he deal", and "an experienced servicer make a big difference in terms of the understanding they had of their obligations to the securitisation and the procedures in place to deal with hiccups or changes to the cash flow". I guess this also explains why Citigroup would back up their CDOs although they don't have the obligations to do so.
