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A synthetic CDO is a variation of a CDO (collateralized debt obligation) that generally uses credit default swaps and other derivatives to obtain its investment goals. [1] As such, it is a complex derivative financial security sometimes described as a bet on the performance of other mortgage (or other) products, rather than a real mortgage security. [2]
A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). [1] ... Synthetic CDOs do not own cash assets like bonds or loans.
Single-tranche CDO or bespoke CDO is an extension of full capital structure synthetic CDO deals, which are a form of collateralized debt obligation.These are bespoke transactions where the bank and the investor work closely to achieve a specific target.
Not all collateralized debt obligations (CDOs) are credit derivatives. For example, a CDO made up of loans is merely a securitizing of loans that is then tranched based on its credit rating. This particular securitization is known as a collateralized loan obligation (CLO) and the investor receives the cash flow that accompanies the paying of ...
Credit default swaps are also used to structure synthetic collateralized debt obligations (CDOs). Instead of owning bonds or loans, a synthetic CDO gets credit exposure to a portfolio of fixed income assets without owning those assets through the use of CDS. [9] CDOs are viewed as complex and opaque financial instruments.
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans, or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt ...
Collateralized loan obligations (CLOs) are a form of securitization where payments from multiple middle sized and large business loans are pooled together and passed on to different classes of owners in various tranches. A CLO is a type of collateralized debt obligation, or CDO.
Many CDOs are collateralized by various types of mortgage-backed securities and other mortgage-related assets. [7] An extension of these CDOs are "synthetic" CDOs which are collateralized by credit default swaps and other derivatives. [8] Collateralized bond obligations are collateralized debt obligations backed primarily by corporate bonds.