Definitions

Sorry, no definitions found. Check out and contribute to the discussion of this word!

Etymologies

Sorry, no etymologies found.

Support

Help support Wordnik (and make this page ad-free) by adopting the word cdo.

Examples

Comments

Log in or sign up to get involved in the conversation. It's quick and easy.

  • "AIG's eventual problem was rooted in its entering a very risky business but treating it as safe. First, AIG Financial Products, the small London-based unit handling credit default swaps, decided to insure 'collateralized debt obligations' (CDOs). CDOs are pools of mortgage loans, but often only a portion of the underlying loans - perhaps involving the most risky part of each loan. Ratings agencies graded many of these CDOs as highest quality, though subsequent events would show these ratings to have been profoundly flawed. Based on the blue-chip ratings, AIG treated its insurance on the CDOs as low risk. Then, because AIG was highly rated, it did not have to post collateral."

    - Robert Weissman, 'The System Implodes: The 10 Worst Corporations of 2008', The Multinational Monitor, 23 Nov 2008.

    November 26, 2008

  • Q1172 Chairman: You cannot tell me what a CDO-squared is? Can anybody tell me what it is?

    Mr Palmer: A CDO-squared is a derivative structure designed to give investors exposure to a CDO.

    Q1173 Chairman: Mr Corrigan, can you try to explain it to us in simple language?

    Mr Corrigan: I think the easiest way to understand what a CDO-squared is to start with what a CDO is. If I were to take the example of mortgage-backed securities, institutions package up a family of individual mortgages into what is a fairly plain vanilla mortgage-backed facility. I think it is entirely fair to say that when those mortgage-backed securities are issued the disclosures associated with the issuance of those instruments are quite wholesome.

    Q1174 Chairman: What does "wholesome" mean?

    Mr Corrigan: A CDO carves out of a plain vanilla mortgage-backed security certain credit tranches of that security and reformulates them in what is called a structured credit product into a particular class of credit standards affecting those particular mortgages, not the full pool of mortgages. That is called a CDO. When you take a CDO and then roll it into a second CDO that is called a CDO-squared; in other words, it is a CDO made up of other CDOs.

    Q1175 Chairman: If you put in another one it is a CDO-cubed?

    Mr Corrigan: Thank God, we have not got that far yet.

    —Select Committee on Treasury, UK Hansard, 4 December 2007

    November 26, 2008

  • Yes, Minister!

    November 26, 2008