collateralized debt obligation

collateralized debt obligation
Structured finance instruments (being debt securities (debt security) in the form of bonds or notes) which are divided into several classes or "tranches" of varying size, credit rating and priority ranking, issued by a special purpose vehicle (SPV) and backed, that is funded by and secured over, a diverse portfolio of financial assets (typically consisting of commercial loans, corporate bonds and/or structured finance securities (including asset-backed securities, mortgage-backed securities and CDO securities issued by other SPVs)) acquired by the SPV. The SPV will purchase the assets in the open market or directly from the balance sheet of the collateral manager or arranging bank. It will fund this purchase with the proceeds arising from the issue of its CDO securities.
A CDO transaction is essentially a form of securitisation of certain financial assets.
A transaction collateralised primarily by a portfolio of loans is a collateralised loan obligation (CLO); one backed by bonds is a collateralised bond obligation (CBO); and one backed by both loans and bonds is a collateralised debt obligation (CDO).
+ collateralized debt obligation (CDO)
A type of debt security backed by a group (or pool) of fixed income assets (ranging from mortgage-backed securities to corporate bonds sold in the market). To maximize the range of investors to whom they can be sold, the securities are divided into different classes. These typically consist of senior and subordinated tranches (often including an equity tranche at the most junior level) that have differing priorities (priority) regarding payment of principal and interest, differing maturities and differing interest rates. The tranches are generally rated by a credit rating agency. The more senior tranches have the right to priority of payment over more junior tranches, but the more junior tranches carry a higher rate of interest, as they are riskier assets.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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  • collateralized debt obligation — ( CDO) (1) A multi tranche security with credit risk exposure to corporations. A securitization of corporate obligations. CDOs can be securitizations or re securitizations of commercial loans, corporate bonds, other types of ABSs, residential… …   Financial and business terms

  • Collateralized Debt Obligation — (CDO) ist ein Überbegriff für Finanzinstrumente, die zu der Gruppe der forderungsbesicherten Wertpapiere (Asset Backed Securities) und strukturierten Kreditprodukte gehören. CDOs bestehen aus einem Portfolio aus festverzinslichen Wertpapieren.… …   Deutsch Wikipedia

  • Collateralized debt obligation — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond …   Wikipedia

  • Collateralized Debt Obligation — Collateralised debt obligation Un CDO (pour collateralized debt obligation, en français, « obligation adossée à des actifs ») est une structure de titrisation d actifs financiers de nature diverse. Sommaire 1 Son fonctionnement 2 Les… …   Wikipédia en Français

  • Collateralized Debt Obligation Cubed - CDO-Cubed — A special purpose vehicle (SPV) with securitization payments in the form of tranches. Collateralized debt obligation cubeds (CDO cubeds) are backed by a pool of collateralized debt obligation squared (CDO squared) tranches. These CDOs are… …   Investment dictionary

  • Collateralized Debt Obligation Squared - CDO-Squared — A special purpose vehicle (SPV) with securitization payments in the form of tranches. A collateralized debt obligation squared (CDO squared) is backed by a pool of collateralized debt obligation (CDO) tranches. This is identical to a CDO except… …   Investment dictionary

  • Collateralized debt obligation — Ein forderungsbesichertes Wertpapier (englisch: „asset backed security“, kurz „ABS“) ist ein verzinsliches Wertpapier, welches Zahlungsansprüche gegen eine Zweckgesellschaft (englisch: „Special Purpose Vehicle“, kurz „SPV“) zum Gegenstand hat und …   Deutsch Wikipedia

  • Collateralized Debt Obligation - CDO — An investment grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often non mortgage loans or bonds. Similar in structure to a collateralized mortgage obligation (CMO) or… …   Investment dictionary

  • Collateralized loan obligation — 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… …   Wikipedia

  • collateralized loan obligation — collateralised loan obligations (CLO) International Also referred to as CLO. Structured finance instruments (being debt securities (debt security) in the form of bonds or notes) which are backed, that is funded by and secured over, a portfolio of …   Law dictionary

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