A type of collateralized debt obligation (CDO) that a dealer creates for a specific group of investors. The CDO is structured according to the investors' needs. The investor group then typically buys a single tranche of the bespoke CDO. The remaining tranches are then held by the dealer, who will usually attempt to hedge against losses.


Bespoke CDOs are a relatively new instrument in the financial world. They allow investors to target very specific risk/return profiles for their investment strategies or hedging requirements. Typically there is little to no secondary market for bespoke CDOs, so pricing must be calculated based on complex theoretical financial models.

  1. Collateralized Debt Obligation ...

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  2. Active Tranche

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  3. Pro-Rata Tranche

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  4. Dealer Incentive

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  6. Dealer

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  1. Are all mortgage backed securities (MBS) also collateralized debt obligations (CDO)?

    Learn more about mortgage-backed securities, collateralized debt obligations and synthetic investments. Find out how these ... Read Answer >>
  2. Can private investors benefit from collateralized debt obligations (CDO)?

    Learn who participates in the industry of collateralized debt obligations or CDOs. Get a general idea of how money is generated ... Read Answer >>
  3. Why do banks securitize some debts, and how do they sell them to investors?

    Learn how and why banks securitize debt, how the securitized debt is sold to other investors, and how different the different ... Read Answer >>
  4. What is a tranche?

    A tranche is a security, like a collateralized mortgage obligation, that can be split up into smaller pieces and subsequently ... Read Answer >>
  5. Is it possible to be perfectly hedged against risk?

    Learn what it means to mitigate the market risk of a portfolio through hedging and to what extent hedging can reduce downside ... Read Answer >>
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