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Tranches

These are divisions of mortgage bonds in which the bonds are divided into pieces.

CDS

This is often referred to as a form of insurance that protects a lender if a borrower of capital defaults on a loan.

FICO Scores

These refer to cumulative numbers that suggest a consumer's credit risk.

CDO

This is a collection of one hundred different mortgage bonds, usually the riskiest that are combined to create a new group of bonds that could take the low rated bonds and reclassify them at a higher rate.

ISDA

This is a group that formalizes the terms of new securities.

Moody's and Standard & Poor's

These are the two major rating agencies that rate the risk of securities.

Mortgage Bonds

Due to their unpredictability, banks began breaking these into divisions to make them more appealing to investors.

FrontPoint

This is the name of the investment group Steve...

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