ERM Glossary: Collateralised Debt Obligation (CDO)

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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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