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As CDOs developed, some sponsors repackaged tranches into yet another iteration, known as "CDO-Squared", "CDOs of CDOs" or "synthetic CDOs". [ 8 ] In the early 2000s, the debt underpinning CDOs was generally diversified, [ 9 ] but by 2006–2007—when the CDO market grew to hundreds of billions of dollars—this had changed.
This packaged debt, known as collateralized debt obligations (CDOs) still exists, but with much stricter rules. Plans have also been laid to allow banks to fail without harming customers or ...
CDOs generated enormous paydays for all these companies. I estimate that they received fees totaling between $200 billion ($50 million times 4,000) and $280 billion for the $4 trillion in CDOs ...
Still another structured product was the "synthetic CDO". Cheaper and easier to create than original "cash" CDOs, these securities did not provide funding for housing. Instead synthetic CDO-buying investors were in effect providing insurance (in the form of "credit default swaps") against mortgage default. Synthetics "referenced" cash CDOs, and ...
CDO-Squared is an investment in the form of a special-purpose entity (SPE) with securitization payments backed by collateralized debt obligation tranches. A collateralized debt obligation is a product structured by a bank in which an investor buys a share of a pool of bonds , loans , asset-backed securities , and other credit instruments.
CDOs are viewed as complex and opaque financial instruments. An example of a synthetic CDO is Abacus 2007-AC1, which is the subject of the civil suit for fraud brought by the SEC against Goldman Sachs in April 2010. [33] Abacus is a synthetic CDO consisting of credit default swaps referencing a variety of mortgage-backed securities.
A U.S. judge overseeing an auction of shares in the parent of Venezuela-owned Citgo Petroleum on Monday agreed to reopen a data room to allow potential buyers to prepare new bids, a court document ...
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]