Beyond CDOs

Escrito el 3 Julio 2008 por Antonio Rivela Rodríguez en Uncategorized

A CDO is a special purpose investment vehicle or SPV. This vehicle is a company established for the special purpose of purchasing and holding a portfolio of assets, in this case debt obligations. The purchase of these assets is funded through the issuance of several classes of securities, so called “tranches”. In a full capital structure CDO, issued tranches range from the least risky AAA (Super Senior) tranche through to the most risky, unrated “equity tranche”, which absorbs any first losses before the next higher tranche absorbs any higher losses. The repayment of the securities or CDOs is linked to the performance of the underlying reference portfolio that serves as collateral for the CDO liabilities.

After the subprime thing everyone is “unluckily” familiar with the word CDO.
In this article taken from the PIMCO website you will find a very good summary of all the brand new credit products.



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