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. Surrender Period

    The amount of time an investor must wait until he or she can ...
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. Investing

    Reassessing Your Approach To Bond Investing

    Rethinking your fixed-income portfolio may not resonate in quite the same way as dropping 10 pounds or finally giving up that smoking habit.
  4. Investing Basics

    What is common stock and preferred stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable rights of ownership.
  5. Investing Basics

    Are over-the-counter stocks different from other stocks?

    Explore the difference between stocks traded over-the-counter and those listed on the NYSE or Nasdaq. Learn how price affects prospects for a stock.
  6. Investing Basics

    What assets are most risky and what assets are safest?

    Learn about the safest and riskiest assets to invest in. Explore savings accounts, T-bills, certificates of deposit, equities and derivatives.
  7. Investing Basics

    How do regulators ensure that markets are conducted at arm's length?

    Learn about arm's length transactions and how the Investment Advisers Act allows stockbrokers to sell securities based on suitability reviews.
  8. Investing Basics

    Are there any pure arm's-length markets?

    Learn about arm's length markets and transactions. Explore situations when different market participants may not be at arm's length.
  9. Options & Futures

    What is the difference between a short position and a short sale?

    Learn how short selling and short positioning are different, specifically in regards to the nature of the commodity being bought and sold.
  10. Fundamental Analysis

    Why would I need to know how many outstanding shares the shareholders have?

    Find out why shareholders should know how many outstanding shares have been issued by a corporation, and learn what happens when more shares are issued.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center