Collateralized Debt Obligation - CDO
An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds.
Investopedia Commentary
Similar in structure to a collateralized mortgage obligation (CMO) or collateralized bond obligation (CBO), CDOs are unique in that they represent different types of debt and credit risk. In the case of CDOs, these different types of debt are often referred to as 'tranches' or 'slices'. Each slice has a different maturity and risk associated with it. The higher the risk, the more the CDO pays.
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See also: Bond, Collateralized Bond Obligation - CBO, Collateralized Mortgage Obligation - CMO, Investment Grade, Junk Bond, Structured Finance, Synthetic Collateralized Debt Obligation, Tranches
Also spelled: CDO