Abstract
Although the existence of complex structures may be justified, in this chapter, we look into some of the problems raised by structuring. First, we characterize some symptoms of why structuring may not work for the benefit of investors. Then, we drill down into the issues related to structural complexity. We examine the behavior of certain complex bonds and show that their structure effectively amplifies the exposure to risks that are difficult to measure. We follow some empirical studies that also show that more complex structures have tended to underperform simpler ones. Finally, we look into ratings following several empirical research papers that show evidence of rating shopping and influence.
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