Collateralized debt obligation
From The Art and Popular Culture Encyclopedia
|
Related e |
|
Featured: |
Collateralized debt obligations (CDOs) are a type of structured asset-backed security (ABS) with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand. CDOs' value and payments are derived from a portfolio of fixed-income underlying assets. CDO securities are split into different risk classes, or tranches, whereby "senior" tranches are considered the safest securities. Interest and principal payments are made in order of seniority, so that junior tranches offer higher coupon payments (and interest rates) or lower prices to compensate for additional default risk.
See also
- Asset-backed security
- Collateralized mortgage obligation (also known by initials CMO)
- Collateralized fund obligation
- Inside Job (film), a 2010 Oscar-winning documentary film about the financial crisis of 2007–2010 by Charles H. Ferguson
- List of CDO managers
- Credit default swap
- Single-tranche CDO
- Synthetic CDO
