CDO Valuation
FASB 157 was in response to the subprime mortgage cris, correct? Prior to fas-157, did banks value their CDO's on a mark to model basis, based upon what they expected. I guess I am a bit confused as to how CDO's were valued in the first place. You'd essentially value the specific tranche you were investing in, and from there would you essentially value it the same way as a fixed income security, nevertheless, not accounting for prepayment risks etc. Any insight would be very helpful. Thanks
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