A synthetic CDO is a variation of a CDO (collateralized debt obligation) that generally uses credit default swaps and other derivatives to obtain its ...
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What makes up a synthetic CDO?
A synthetic collateralized debt obligation, or synthetic CDO, is a transaction that transfers the credit risk on a reference portfolio of assets. The reference portfolio in a synthetic CDO is made up of credit default swaps. Thus, a synthetic CDO is classified as a credit derivative.
Is a synthetic CDO the same as a CDS?
Synthetic CDOs are an advanced form of CDOs. While the underlying assets of regular CDOs are traditional fixed-income assets, such as loans, mortgages, and bonds, synthetic CDOs use non-cash assets as the underlying asset, such as credit default swaps, options, and other such contracts.
Why were synthetic CDOs bad?
They were highly criticized for their role in the subprime mortgage crisis, which led to the Great Recession. Investors initially only had access to subprime mortgage bonds for as many mortgages as existed. However, with the creation of synthetic CDOs and credit default swaps, exposure to these assets increased.
What is a CDO made of?
A collateralized debt obligation (CDO) is a complex structured finance product that is backed by a pool of loans and other assets and sold to institutional investors. A CDO is a particular type of derivative because, as its name implies, its value is derived from another underlying asset.
A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt ...
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A synthetic CDO is a collateralized debt obligation that invests in credit default swaps or other non-cash assets to gain exposure to fixed income.
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A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default (by the ...
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The shadow banking system is a term for the collection of non-bank financial intermediaries (NBFIs) that legally provide services similar to traditional ...
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The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global ...
The 2007–2008 financial crisis, or the global financial crisis (GFC), was the most severe worldwide economic crisis since the Great Depression.
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Synthetic CDOs are made up of assets which are reference entities or credit default swaps. Instead of receiving principal and interest they receive credit ...
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Cagayan de Oro (CDO), officially the City of Cagayan de Oro is a 1st class highly urbanized city in the region of Northern Mindanao, Philippines.
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Dec 23, 2009 · Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.'s — and then ...