Collateralized Debt Obligation

Collateralized Debt Obligation

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.

Read more about Collateralized Debt Obligation:  Summary, Creation of CDOs, Market History and Growth, Concept, Structures, Taxation of CDOs, Types of CDOs, Types of Collateral, Transaction Participants, Subprime Mortgage Crisis

Other articles related to "collateralized debt obligation, collateralized debt obligations, collateralized, obligations":

Collateralized Debt Obligation - Subprime Mortgage Crisis
... with financial innovation such as the mortgage-backed security (MBS) and collateralized debt obligation (CDO), which were assigned safe ratings by the credit rating ... quarter earnings that contained $7.9 billion of losses on collateralized debt obligations ... all first quarter 2008 CDO issuance was in the form of collateralized loan obligations backed by middle-market or leveraged bank loans, not by home mortgage ABS ...

Famous quotes containing the words obligation and/or debt:

    So what if people say terrible things? Whatever they call me, I say, “Yes, and my name is Mary.” I refuse to be afraid. And I do this out of an obligation not to the community but to myself. Nobody should have a say in who I am.
    Mary Hansen (b. c. 1975)

    Let every man, every corporation, and especially let every village, town, and city, every county and State, get out of debt and keep out of debt. It is the debtor that is ruined by hard times.
    Rutherford Birchard Hayes (1822–1893)