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FINANCIAL MARKET COURSES

Securitization - CDOs - An Introduction

A collateralized debt obligation (CDO) is a security backed by a pool of loans, bonds or other securities. A CDO deal is broken into multiple tranches, each with separate maturity and credit risk, appealing to different classes of investors. Various forms of credit enhancement are used and CDO tranches are rated by the main credit rating agencies. CDOs represented the fastest growing segment of the securitization market in the years leading up to the global financial crisis of 2007/9.

 

This course explains how CDOs are issued and structured, and outlines the common issuer and investor motivations for entering CDO deals.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Identify the main features of collateralized debt obligations

    Differentiate between the variants of collateralized debt obligations

    Explain issuer and investor motivations in relation to collateralized debt obligations

  • COURSE OUTLINE

    Topic 1: Basics of Collateralized Debt Obligations

    Collateralized Debt Obligations

    The History of CDOs up to the Financial Crisis

    Issuing CDOs

    Payment Structure

    Credit Enhancement

    CDO Credit Ratings

    CDOs and Asset-Backed Securities

    Topic 2: CDO Structures

    Balance Sheet and Artbitrage CDOs

    Static and Dynamic CDOs

    Cash Flow and Market Value CDOs

    Cash and Synthetic CDOs

    Topic 3: Issuer and Investor Mitivations

    Issuer Motivations

    Investor Motivations

    Risks of Investing in CDOs

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

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