Problem: AIG was effectively the largest unfunded investor in the super-senior tranches of the Abacus 2004 deal.
This means that AIG:
A) Owned all of the underlying subprime collateral of the Abacus CDO
B) Effectively would sell the underlying subprime collateral as the mortgages began to default.
C) Was committed to buy defaulted collateral from the CDO to make the short investors whole.
D) Would have to pay the short investors annual premiums