Toxic Waste
What Does Toxic Waste Mean?
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 Links
- 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.
- CDOs And The Mortgage Market - These structured products contribute to keeping borrowing rates low.
