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What does collateralized debt obligation mean?

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collateralized debt obligation
(CDO)
Noun

A structured pay-through security created by a special purpose vehicle (SPV) that buys an originator’s receivables or other financial assets that serve as collateral and that are ordered into multiple tranches (classes) by seniority and/or repayment time, with each tranche sold as a separate security having different rights over the portfolio and a different risk-return profile.

Synonym(s): 
  • cash CDO; cash collateralized debt obligation.
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