The kind of CDO strategy that is been deployed by Magnetar during 2007 can be summarized as systematically mispriced which made them to swooped securities though it later brought a big returns.
Magnetar CDO strategy can be considered different from that of Paulson’s strategy in the sense that Magnetar strategy is on pricing anomalies which was believe to bring returns no matter what, while Paulson’s strategy always took time to have a view on the market.
- CDO strategy by Magnetar was a kind of systematically mispriced system and can be considered pricing anomalies because, securities were swopped in without much consideration, however it paid off.
- Magnetar spawn CDOs, through purchasing of riskiest securities, also bett against the less-risky slices.
- Paulson made about $3.7 billion, during the market crash as a result of his strategy.
Therefore, Paulson’s strategy took time to study how things will go, but Magnetar like taking much risk.
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