Toxic Waste

AAA

DEFINITION of 'Toxic Waste'

A slang term referring to securities that are unattractive due to certain underlying provisions or risks making them generally illiquid with poor pricing schemes and transparency.

INVESTOPEDIA EXPLAINS 'Toxic Waste'

Mainly used in reference to CMOs, toxic waste represents the small portion of these products that are byproducts created as a result of providing the majority of CMOs with minimal risk. In effect, this small portion of byproducts is used as outlets for transferring a substantial portion of the underlying risks involved in making the obligations and then marketed to investors.

RELATED TERMS
  1. Collateralized Mortgage Obligation ...

    A type of mortgage-backed security in which principal repayments ...
  2. Structured Finance

    A service that generally involves highly complex financial transactions ...
  3. Tranches

    A piece, portion or slice of a deal or structured financing. ...
  4. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  5. Pass-Through Security

    A pool of fixed-income securities backed by a package of assets. ...
  6. Accelerated Return Note (ARN)

    A short- to medium-term debt instrument that offers a potentially ...
RELATED FAQS
  1. How significantly does government regulation impact the chemicals sector?

    Federal government regulations have a significant impact on chemicals sector functioning in terms of industry procedure as ... Read Full Answer >>
  2. What dividend yield is typical for companies in the industrial sector?

    The average dividend yield of the industrial goods sector is approximately 1.71%. The industrial goods sector is a group ... Read Full Answer >>
  3. Which securities are considered investment grade?

    In finance, government and private fixed income securities, such as bonds and notes, are considered investment grade if they ... Read Full Answer >>
  4. Which REITs pay the highest dividends?

    A real estate investment trust (REIT) is a financial security that trades like a stock on major market exchanges. However, ... Read Full Answer >>
  5. What is the difference between an Equity REIT and a Mortgage REIT?

    There are several types of real estate investments trusts (REITS) that investors can purchase, including equity REITS and ... Read Full Answer >>
  6. How does a lack of demand affect financial markets?

    A lack of demand affects financial markets by leading to lower prices. The function of financial markets is to constantly ... Read Full Answer >>
Related Articles
  1. Insurance

    CDOs And The Mortgage Market

    These structured products contribute to keeping borrowing rates low.
  2. Options & Futures

    20 Investments You Should Know

    To take advantage of all your investing options, you need to know what your choices are. Here we tell you about the diverse features and advantages of 20 different financial instruments.
  3. Bonds & Fixed Income

    How Are Zero-Coupon Municipal Bonds Taxed?

    What every investor needs to know about taxes and zero-coupon muni bonds.
  4. Bonds & Fixed Income

    Muni Bonds, Taxable Bonds or CDs: Which is Best?

    Here's how to tell if municipal bonds are a better investment than taxable bonds or CDs.
  5. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  6. Investing Basics

    What is a Nominal Value?

    The nominal value of a security, such as a stock or bond, remains fixed for the duration of its life.
  7. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
  8. Investing

    The Strong Dollar’s (Real) Toll On Tech Stocks

    A large portion of U.S. technology companies’ sales occur overseas, given the strong international business and consumer demand from many U.S. tech firms.
  9. Professionals

    Why You Should Avoid Fixating on Bond Duration

    Financial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration.
  10. Investing

    The Case For Stocks Today

    Last week, U.S. equities advanced with the S&P 500 Index notching new records. Investors are now getting nervous with rate and currency volatility spiking.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center