Home » Kids Questions & Answers » Social Science Questions & Answers » What is collateral debt obligation?

What is collateral debt obligation?

What is collateral debt obligation?Collateral Debt Obligation (CDO) is the cause of the sub-prime crisis and recession. European banks and investors bought sub-prime housing loan portfolios from original US lenders to diversify their investment portfolio before the sub-prime crisis. At that time, it seemed a lucrative investment avenue. These are known as Mortgage Backed Securities (MBS). Most of these loans were bought as part of CDOs. CDOs are just like mutual funds with two significant differences. Unlike mutual funds, in CDOs, all investors do not share risk equally and every participatory group has different risk profiles. Compared to mutual funds, which normally buy shares and bonds, they usually buy securities that are backed by loans. Later on, CDOs became toxic assets for these banks and investors.

Check Also

वार्षिक आर्थिक राशिफल – Annual Financial Predictions

फरवरी 2018 साप्ताहिक आर्थिक राशिफल: नंदिता पाण्डेय

साप्ताहिक आर्थिक राशिफल: 19 – 25 फरवरी, 2018 – Weekly Financial Predictions मेष (Aries): आर्थिक मसले तभी बेहतर परिणाम …

Leave a Reply

Your email address will not be published. Required fields are marked *