SYNTHETIC CDO
Collateralized debt obligation investing in credit default swaps or other non-cash assets to accumulate exposure to a portfolio of fixed-income assets. Normally, these are divided into credit tranches according to the credit risk level assumed. Lower tranches make up the initial investments into these debt obligations while senior tranches need not to make an initial investment. These tranches receive regular payments based on the cash flows from these swaps. The synthetic CDO and its investors will take responsibility on the losses in case the event takes place in the fixed income portfolio.
POPULAR TERMS
Affirmative Covenant
A kind of contract or promise that requires a party to conduct some action. For example, a bond covenant which provides that the issuer must delive ...
Pure Risk
A risk where loss is the only potential outcome; there is no positive result. A pure risk is related to events that are out of control of the risk- ...
Efficiency
Performance level describing a process which uses the lowest amount of inputs to come up with the greatest amount of inputs. It is relative to usin ...
Tax Free
Goods and/or financial products that are not taxable. Having the tax free status allows an entity to save money and encourages additional spending ...
Reprice
A situation that is most often allowed for company executives or high-level employees. It permits them to trade in their options that out of the mo ...
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