Synthetic CDO (Synthetic Collateralized Debt Obligation). These non-cash assets primarily consist of financial derivatives, such as credit default swaps (CDS), options, and various contractual agreements.

Concept. CDOs vary in structure and underlying assets, but the basic principle is the same. A CDO is a type of asset-backed security. To create a CDO, a corporate entity is constructed to hold assets as collateral backing packages of cash flows which are sold to investors.

Collateral Debt Obligations | CFA Level I Fixed Income CDOs are structured securities backed by a pool of debt obligations, like mortgages, auto loans, or credit card loans. When we pool multiple ABS together as collateral, we create CDOs.

When the housing bubble burst and subprime borrowers went into default at high rates, the CDO market went into a meltdown. This caused many investment banks to either go bankrupt or be bailed out by the government. Despite this, CDOs are still in use by investment banks today. Tom Nicholas and Matthew G.