A single-name CDS references only one security and the credit risk to be transferred in the swap may be very large. In contrast, a synthetic CDO references a portfolio of securities and is sliced into various tranches of risk, with progressively higher levels of risk.

CDOs are larger financial products that institutions then sell on a secondary market. Each CDO may include credit card debt, mortgages, auto loans and corporate debt. They are considered collateralized because borrowers have promised to repay the debt within each part of the CDO.

Collateralized debt obligations (CDOs) are a type of structured investment finance product that contain various assets and loan products. Investment banks package bank loans, mortgages, and other assets into collateralized debt obligations—similar to funds—for institutional investors to buy.

MBS, as their name implies, are made up of mortgages—home loans bought from the banks that issued them. In contrast, CDOs are much broader: They may contain corporate loans, auto loans, home equity loans, credit card receivables, royalties, leases, and, yes, mortgages.