ERM Glossary: Collateralised Debt
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A (physical) Collateralised Debt
Obligation (CDO) is a security issued by a third party which references ABSs or
other assets purchased by the issuer. The main feature of a CDO that generally
differentiates it from other asset pools is the presence of tranching, in which
different investors in the CDO have different priority rights to cash flows
arising from the asset pool.
CDOs may also be synthetic.
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