What is a CDO?

The hybrid, hi-fi finance is something I always struggle with. I understand the basics but if asked to put it in word would struggle quite a bit. It is much easier to write on basic economics and finance issues.

For instance what is Collateralized Debt Obligations or CDO? I know it but cannot explain.

Susan Black and Alan Rai of Reserve Bank of Australia have written an excellent primeron CDO which is a must read. They start with how it is structured (also show the balance sheet of a CDO), explain the differences between the various types and the Australian market for the same.

Excellent stuff.

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