Bespoke CDO

AAA

DEFINITION of 'Bespoke CDO'

A type of collateralized debt obligation (CDO) that a dealer creates for a specific group of investors. The CDO is structured according to the investors' needs. The investor group then typically buys a single tranche of the bespoke CDO. The remaining tranches are then held by the dealer, who will usually attempt to hedge against losses.

INVESTOPEDIA EXPLAINS 'Bespoke CDO'

Bespoke CDOs are a relatively new instrument in the financial world. They allow investors to target very specific risk/return profiles for their investment strategies or hedging requirements. Typically there is little to no secondary market for bespoke CDOs, so pricing must be calculated based on complex theoretical financial models.



RELATED TERMS
  1. Collateralized Debt Obligation ...

    An investment-grade security backed by a pool of bonds, loans ...
  2. Synthetic CDO

    A form of collateralized debt obligation (CDO) that invests in ...
  3. Structured Finance

    A service that generally involves highly complex financial transactions ...
  4. Credit Default Swap - CDS

    A swap designed to transfer the credit exposure of fixed income ...
  5. Collateralized Bond Obligation ...

    An investment-grade bond backed by a pool of junk bonds. Junk ...
  6. Agency Swap Program

    A form of securitization whereby single-family residential mortgages ...
RELATED FAQS
  1. How can I calculate the Macaulay duration of a zero-coupon bond?

    The funds from operations is a measure of the amount of cash flow that a business's operations generates. Real estate investment ... Read Full Answer >>
  2. What risks are associated with a closed end investment?

    A closed-end fund is an investment instrument that is listed on an exchange and trades much like common stock shares. Its ... Read Full Answer >>
  3. Can an investor use leveraged ETFs to invest in the airline sector?

    As of 2015, there are no leveraged exchange-traded funds (ETFs) available to track the airline industry within the transportation ... Read Full Answer >>
  4. What's the difference between a collateralized mortgage obligation (CMO) and a mortgage-backed ...

    A mortgage-backed security, or MBS, and a collateralized mortgage obligation, or CMO, are different types of asset-backed ... Read Full Answer >>
  5. What are the primary differences between a closed end investment and an open end ...

    The primary differences between closed-end funds and open-end funds lie in how they are structured and how they are bought ... Read Full Answer >>
  6. What are the most common leveraged ETFs that track the drugs sector?

    The most common leveraged exchange-traded funds (ETFs) that track the pharmaceutical industry are the two offered by Proshares: ... Read Full Answer >>
Related Articles
  1. Insurance

    CDOs And The Mortgage Market

    These structured products contribute to keeping borrowing rates low.
  2. Insurance

    Investing In Securitized Products

    Securitized assets are customizable and have a wide range of yields, making them an attractive asset class.
  3. Bonds & Fixed Income

    Bailout Acronyms 101

    The subprime meltdown gave rise to a mouthful of financial acronyms. Learn how to sort through this alphabet soup.
  4. Options & Futures

    These Financial Products Are Too Complex For The Average Joe

    Structured financial products are so elaborate that investors are unable to assess costs and risk.
  5. Retirement

    Collateralized Debt Obligations: From Boon To Burden

    CDOs were to be Wall Street's boon - instead they went bust. Find out what went wrong.
  6. Investing

    Should You Buy Marijuana Stock?

    The legalization of marijuana has created a new investment niche: pot stocks.
  7. Forex

    Is Bitcoin Mining Still Profitable?

    Recent changes in technology and the creation of professional mining centers individual miners are asking themselves, is bitcoin mining still profitable?
  8. Investing Basics

    Calculating Funds from Operations

    Funds from operations (FFO) measures the performance of a real estate investment trust (REIT) and other similar types of investments.
  9. Investing

    These Investments Have Soared in 2015

    These five investments are on fire and still offer high potential going forward. Here's why.
  10. Professionals

    Due Diligence Tips for Investing in Alternatives

    Alternative investments can provide unique benefits to clients for whom they are suitable. But do your due diligence and beware of the risks.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center