A Primer On Collateralized Debt Obligation (CDOs)
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A CDO is a structured financial product backed by a pool of loans. The promised repayment of the loans in the pool is the collateral that gives the CDOs value; hence the term "collateralized."
Collateral is property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup its losses.
A mortgage is a loan used to purchase a home, where the property serves as the borrower's collateral.
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