CDOs by Edu Pristine

Author of lecture CDOs

Edu Pristine

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... (CDO) is an asset backed security structure backed by debt instrument collateral. ...

... Loan Obligations (CLOs) where as bond backed CDOs are called Collateralized Bond Obligations. Later, CDOs were backed ...

... Rating enhancement for the senior classes is achieved through prioritizing the cash flows or through external credit support. Rating agencies have internal models to rate the senior tranches based on the probability of shortfalls due to defaults. Example: Tranche A pays LIBOR + ...

... package must equal that of the underlying securities. The expected default rate, averaged by market values, must be the same. So, if some tranches are less risky, others must bear more risk. ...

... Sheet: The primary goal of balance sheet CDOs is to move loans off the balance sheet of ...

... The market value CDO on the other hand will sell the underlying collateral to meet the cash flow requirements.  ...

... Assets are bought at initiation and form the collateral pool. Cash flows from this collateral pool are then used to meet any liabilities In a Managed portfolio CDO, there is an active management of assets. The collateral manager can sell the ...

... issues relating to loan sale -Very flexible -Rapidly gaining popularity -Synthetic structure allows for isolation of the risk -Super-senior structure allows for very cheap rate of financing. Other types of second generation synthetic ...