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Collateralized Debt Obligation (CDO)
A complex financial instrument used to pool various types of debt and then slice them into tranches, sometimes relevant in financing M&A transactions.
Implications
A complex financial instrument that pools together various debt securities and repackages them into tranches with different risk levels, often used in structured finance.
Example
Example: Banks bundle mortgages into CDOs and sell them to investors, offering different tranches with varying levels of risk and return.
Related Terms
Different from standard bonds, CDOs are more complex and involve a mix of debt instruments, which can include mortgages, loans, and other assets.
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