The Debts' Default Probabilities Underlying CDOS

In this article, I firstly begin with the possible reasons for subprime mortgage crisis, and its linkage to collateralized debt obligations (CDOs). According to some claims that the CDO rating agencies should be responsible for the crisis, I then propose my methodology on how to check the debts' default probabilities underlying the CDOs, because with these default probabilities, we can check whether the rating agencies' rating on CDO was really lagged behind the market during the subprime mortgage. In the third part of the article, I give a simple example on how to implement the method.