CDOs: Types

CDOs: Types

Intuition Publishing Pty Ltd
Updated Sep 25, 2020

A CDO is an asset-backed security whose underlying collateral is typically a portfolio of bonds or bank loans, or a credit derivative referencing such a portfolio. A multi-tranche subordinated structure is the primary form of credit enhancement with CDOs. Here we look at the tranche structures of CDOs, underlying collateral, issuer motivations underlying CDO issues, and how synthetic CDOs use credit derivatives to transfer risk to investors.