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. Tranches

    A piece, portion or slice of a deal or structured financing. ...
  3. Pass-Through Security

    A pool of fixed-income securities backed by a package of assets. ...
  4. Structured Finance

    A service that generally involves highly complex financial transactions ...
  5. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  6. Bulldog Market

    A nickname for the foreign bond market of the United Kingdom. ...
Related Articles
  1. CDOs And The Mortgage Market
    Insurance

    CDOs And The Mortgage Market

  2. 20 Investments You Should Know
    Options & Futures

    20 Investments You Should Know

  3. War's Influence On Wall Street
    Bonds & Fixed Income

    War's Influence On Wall Street

  4. The Basics Of Outstanding Shares And ...
    Investing Basics

    The Basics Of Outstanding Shares And ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center