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Collateralised Debt Obligations (CDOs), and variants

Description

STANDARD

A pool of bonds or loans is restructured into tranches: payments from the pool’s cash-flows are first made to the highest rated tranche, then to the second-highest rated tranche etc so that any default is borne by the lower tranches first.

SYNTHETIC

As above, except that a pool of CDSs is used instead of cash assets

Credit Derivative Instruments

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