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Goldman was the short investor for the entire Abacus 2004 CDO: it purchased credit default swap protection on these reference securities from the CDO. The funded investors were IKB (a German bank), the TCW Group, and Wachovia. These banks purchased the mezzanine tranches of the deal. In this situation which parities lose if the underlying mortgage assets default at rates higher than expected?

Pick one or more of the following.
The investors with the short position.
The funded investors.
Niether
Both sides

 

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