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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.
Say it ain't so. It wasn't all that long ago the term "collateralized debt obligation" struck fear into the hearts of people everywhere: CDOs being widely known as one of the Wall Street ...
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 ...
The Securities and Exchanges Commission's allegations about Goldman Sachs (GS) fraudulently selling a synthetic collateralized debt obligation called Abacus raise several fundamental questions ...
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 ...
The main difference between CDOs and derivatives is that a derivative is essentially a bilateral agreement in which the payout occurs during a specific event which is tied to the underlying asset. Other more complicated CDOs have been developed where each underlying credit risk is itself a CDO tranche. These CDOs are commonly known as CDOs-squared.
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]
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.