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.

BREAKING DOWN '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. Collateralized Debt Obligation ...

    A special purpose vehicle (SPV) with securitization payments ...
  4. Weighted Average Rating Factor ...

    A measure that is used by credit rating companies to determine ...
  5. Sequential Pay CMO

    A type of collateralized mortgage obligation (CMO) in which there ...
  6. Diversity Score

    A measure, created by Moody's Investors Service, to estimate ...
Related Articles
  1. Investing

    Understanding Structured Finance

    Structured finance refers to a complex financial transaction involving large financial institutions and companies with unique needs.
  2. Personal Finance

    CDOs and the Mortgage Market

    These structured products contribute to keeping borrowing rates low.
  3. Investing

    A Primer On Collateralized Debt Obligation (CDOs)

    A collateralized debt obligation, or CDO, is a structured financial product backed by a pool of loans. When a retail or commercial bank approves loans such as mortgages, auto loans or credit ...
  4. Financial Advisor

    Collateralized Debt Obligations: From Boon To Burden

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

    The Return of CDOs After the 2008 Financial Crisis

    Learn how the market for CDOs is coming back after the 2008 financial crisis, and understand how the market for these products has changed.
  6. Personal Finance

    Why Are Mortgage Rates Increasing?

    Learn how the secondary mortgage market and investor demand affect the cost of home ownership.
  7. Personal Finance

    Bespoke Post Review: Is It Worth It?

    Find out if Bespoke Post, the fast-growing, e-commerce subscription service for men's lifestyle and grooming products, is worth all of the hype in this review.
  8. Investing

    What are Tranches?

    Tranches often describe specific classes of bonds within a security that hold different degrees of risks and maturities.
  9. Investing

    3 Bonds You May Have Never Heard Of

    These lesser-known bonds may give your portfolio a boost when other investments products fall short.
  10. Investing

    Zachary Karabell on Future of Bespoke Portfolios

    Zachary Karabell says the future of investing will involve bespoke portfolios designed to accommodate ESG.
RELATED FAQS
  1. What's the difference between a collateralized debt obligation (CDO) and a collateralized ...

    Find out how a collateralized mortgage obligation (CMO) is similar to a collateralized debt obligation (CDO), as well as ... Read Answer >>
  2. Are all mortgage backed securities (MBS) also collateralized debt obligations (CDO)?

    Learn more about mortgage-backed securities, collateralized debt obligations and synthetic investments. Find out how these ... Read Answer >>
  3. What is the difference between a collateralized debt obligation (CDO) and an asset ...

    Discover the relationships between asset-backed securities (ABS), collateralized debt obligations (CDOs) and mortgage-backed ... Read Answer >>
  4. Were collateralized debt obligations (CDO) responsible for the 2008 financial crisis?

    Learn what role collateralized debt obligations, exotic financial instruments that can be difficult to understand, played ... Read Answer >>
  5. Can private investors benefit from collateralized debt obligations (CDO)?

    Learn who participates in the industry of collateralized debt obligations or CDOs. Get a general idea of how money is generated ... Read Answer >>
  6. Why do banks securitize some debts, and how do they sell them to investors?

    Learn how and why banks securitize debt, how the securitized debt is sold to other investors, and how different the different ... Read Answer >>
Hot Definitions
  1. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  3. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  4. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
  5. Long Run

    A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all ...
  6. Quasi Contract

    A legal agreement created by the courts between two parties who did not have a previous obligation to each other. A normal ...
Trading Center