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Basics
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Credit
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Credit derivatives terminology
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Vinod Kothari Collateralized debt obligation (CDO): Obligations, usually issued by a special purpose vehicle, which are collateralized or backed by a portfolio of debt investments, usually, loans or bonds, either transferred by a single originator or picked up from the market. A CDO is usually structured either for reducing the balance sheet size of an originator (balance sheet CDO) or for arbitrage profits (arbitrage CDO). CDOs can invest in either cash assets (Cash CDO) or in synthetic assets (synthetic CDO), or invest in a mixture of cash and synthetic assets (hybrid CDO).
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