The Bubble Is Complete: 'Smart Money' Buys Into Bespoke Tranche "Opportunity" (Again) | Zero Hedge: "Goldman is marketing what the bank calls a “bespoke tranche opportunity”, which is in many ways financial engineering taken to its logical extreme, as it allows the customer (or, as banks will call him/her, the “investor”) to actually participate in the creation of Frankenstein by choosing the credits that are included in the tranche on which protection is being bought/sold. Why would anyone want to do this? Well, there are a few reasons, but it basically comes down to whether you, the investor, think you either have a particularly good read on the outlook for a specific set of credits, or believe that a customized basket of credits offers a better risk/reward profile than standardized IG/HY indices, or both. As Citi notes, if you can find a mix of credits you’re comfortable with, you can juice the yield well above what you’d be getting on a pure IG portfolio and still be happy with the level of risk. If you’re in the equity tranches and you’re good at selecting credits that hold up, you can take advantage of structural leverage.
So, in a nutshell, this is the synthetic CDO equivalent of a Build-A-Bear Workshop. "
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