Collaterilzed Debt Obligation's are in essence asset backed securities that are made up of a portfolio of underlying assets, mainly fixed income assets.They are assigned risk classes then packaged to sell to financial institutions. The major downside to CDOs is that rather than spreading risk through diverisification, they pass along risk through the financial system so the risk is technically supposed to be minimized through sharing. Many major investors and financial giants like Warren Buffet and Alan Greenspan claim to not understand CDOs mainly because of the way the risk is spread and the way they are setup.
Read more about CDOs, Tranches (the asset classification system), Asset-Backed Securities, and
Structured Finance here:
Collateralized Debt Obligation
Tranche
Asset-Backed Securities
Structured Finance
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment