CDO

abbreviation

1. collateralized debt obligation

Example Sentences

In the process, Goldman Sachs created a security so opaque and complex that it would remain forever misunderstood by investors and rating agencies: the synthetic subprime mortgage bond–backed CDO, or collateralized debt obligation.

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Like the credit default swap, the CDO had been invented to redistribute the risk of corporate and government bond defaults and was now being rejiggered to disguise the risk of subprime mortgage loans.

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In a CDO you gathered one hundred different mortgage bonds—usually, the riskiest, lower floors of the original tower—and used them to erect an entirely new tower of bonds.

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The CDO was, in effect, a credit laundering service for the residents of Lower Middle Class America.

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Put another way: To create a billion-dollar CDO composed solely of triple-B-rated subprime mortgage bonds, you needed to lend $50 billion in cash to actual human beings.

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