Collateralized debt obligations (cdo) security against endorsed assets (ABS)


Asset-backed securities (ABS) is a security created by combining non-mortgage assets, which are then resold to investors. With a secured debt obligation (cdo) is a type of ABS, which can be based on the collateral, the collateral or both.

Understanding the differences

ABS came from mortgage-backed securities (MBS], which are created from pools of mortgage assets, as a rule, the first mortgage housing loans. Not mortgages, ABS backed by credit card receivables, home equity loans, student loans, auto loans and other mortgage financing.

Ideally, this ABS issued by the special purpose vehicle (SPV), which is a legal entity or trust formed for the issuance of debt. The CCCS sometimes klassificeret their primary duty. The secured loan obligations (Clos) are debt-based Bank loans, for example. Collateralized bond obligations (CBOS) based on bonds or other debt obligations.

In structured Finance-collateralized debt obligations, the underlying assets of ABS, residential MBS or commercial or real estate investment Fund (zpifn) debt. Cash debt obligations backed by cash market debt instruments, whereas synthetic debt obligations backed by other credit derivatives.

In contrast to the collateralized mortgage obligation (CMO) is a complex type of MBS. In contrast to SPO, CMOS based only on MBS, so it can be particularly strongly affected by changes in interest rates, down payments, and mortgage credit risk. OOD and CMOS, both are focused on institutional investors. In CMD, interest, and principal payments can be divided into different classes of securities, depending on the riskiness of mortgage loans, but this is not required.

Ideally, however, devices with different degrees of credit quality and return are grouped into at least three tranches, each with the same level of maturity. Stock tranches pay the highest yield, but also carry low credit ratings. The senior tranches provide the best quality credit, but low yield. Mezzanine tranches to fall somewhere between equity and senior tranches with terms of credit quality and profitability.

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