Synthetic CDO

Synthetic CDO

A synthetic CDO is a collateralized debt obligation (CDO) in which the underlying credit exposures are taken on using a credit default swap rather than by having a vehicle buy physical assets. Synthetic CDOs can either be single tranche CDOs or fully distributed CDOs. Synthetic CDOs are also commonly divided into balance sheet and arbitrage CDOs, although it is often impossible to distinguish in practice between the two types.


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  • Credit default swap — If the reference bond performs without default, the protection buyer pays quarterly payments to the seller until maturity …   Wikipedia

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