Collateralised Debt Obligation

This Issue in United States

Collateralised Debt Obligation (cdo)

Concept of Collateralised Debt Obligation (cdo) in the context of derivatives contract, by the International Swaps and Derivatives Association (ISDA): A structure used to distribute risk through tranching a portfolio of credit, and issuing notes or swaps of different risk profiles to investors. The risk of the tranche is determined by an attachment point and a detachment point. Riskier tranches will earn a higher investor premium, to reflect the higher risk. The CDO portfolio can be static or managed, depending on the specific terms of the transaction. CDO notes will typically be issued to the investor by an SPV.

Resources

See Also

• Derivatives Contract