What commonly is referred to as “Collateralized debt obligations” or CDOs are
securitization of a pool of asset (generally non-mortgage), in other words a
securitized interest. The underlying assets (a.k.a. collateral) usually comprise
loans or other debt instruments. A CDO may be called a collateralized loan
obligation (CLO) or collateralized bond obligation (CBO) if it holds only loans or
bonds, respectively. Investors bear the “structured” credit risk of the collateral.
Typically, multiple tranches (or notes) of securities are issued by the CDO,
offering investors various composite of maturity and credit risk characteristics.
Tranches are categorized as senior, mezzanine, and subordinated/equity,
according to their degree of credit risk. If there are defaults or the CDO's
collateral otherwise underperforms/migrates/early amortize, scheduled payments
to senior tranches take precedence over those of mezzanine tranches, and
scheduled payments to mezzanine tranches take precedence over those to
subordinated/equity tranches. This is referred to as the “Cash Flow Waterfall”
What commonly is referred to as “Collateralized debt obligations” or CDOs are
securitization of a pool of asset (generally non-mortgage), in other words a
securitized interest. The underlying assets (a.k.a. collateral) usually comprise
loans or other debt instruments. A CDO may be called a collateralized loan
obligation (CLO) or collateralized bond obligation (CBO) if it holds only loans or
bonds, respectively. Investors bear the “structured” credit risk of the collateral.
Typically, multiple tranches (or notes) of securities are issued by the CDO,
offering investors various composite of maturity and credit risk characteristics.
Tranches are categorized as senior, mezzanine, and subordinated/equity,
according to their degree of credit risk. If there are defaults or the CDO's
collateral otherwise underperforms/migrates/early amortize, scheduled payments
to senior tranches take precedence over those of mezzanine tranches, and
scheduled payments to mezzanine tranches take precedence over those to
subordinated/equity tranches. This is referred to as the “Cash Flow Waterfall”
What commonly is referred to as “Collateralized debt obligations” or CDOs are
securitization of a pool of asset (generally non-mortgage), in other words a
securitized interest. The underlying assets (a.k.a. collateral) usually comprise
loans or other debt instruments. A CDO may be called a collateralized loan
obligation (CLO) or collateralized bond obligation (CBO) if it holds only loans or
bonds, respectively. Investors bear the “structured” credit risk of the collateral.
Typically, multiple tranches (or notes) of securities are issued by the CDO,
offering investors various composite of maturity and credit risk characteristics.
Tranches are categorized as senior, mezzanine, and subordinated/equity,
according to their degree of credit risk. If there are defaults or the CDO's
collateral otherwise underperforms/migrates/early amortize, scheduled payments
to senior tranches take precedence over those of mezzanine tranches, and
scheduled payments to mezzanine tranches take precedence over those to
subordinated/equity tranches. This is referred to as the “Cash Flow Waterfall”
What commonly is referred to as “Collateralized debt obligations” or CDOs are
securitization of a pool of asset (generally non-mortgage), in other words a
securitized interest. The underlying assets (a.k.a. collateral) usually comprise
loans or other debt instruments. A CDO may be called a collateralized loan
obligation (CLO) or collateralized bond obligation (CBO) if it holds only loans or
bonds, respectively. Investors bear the “structured” credit risk of the collateral.
Typically, multiple tranches (or notes) of securities are issued by the CDO,
offering investors various composite of maturity and credit risk characteristics.
Tranches are categorized as senior, mezzanine, and subordinated/equity,
according to their degree of credit risk. If there are defaults or the CDO's
collateral otherwise underperforms/migrates/early amortize, scheduled payments
to senior tranches take precedence over those of mezzanine tranches, and
scheduled payments to mezzanine tranches take precedence over those to
subordinated/equity tranches. This is referred to as the “Cash Flow Waterfall”
Waterfall collection in long term debt
Linear Mode
