Collateralized Loan Obligation - CLO
A special purpose vehicle (SPV) with securitization payments in the form of different tranches. Financial institutions back this security with receivables from loans.
Investopedia Commentary
Identical to a CMO except for the assets securing the obligation. CLOs allow banks to reduce regulatory capital requirements by selling large portions of their commercial loan portfolios to international markets, reducing risks associated with lending.
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See also: Collateralized Debt Obligation - CDO, Collateralized Mortgage Obligation - CMO, Portfolio, Reserve Requirements, Securitization, Special Purpose Vehicle - SPV, Structured Finance, Synthetic Collateralized Debt Obligation, Tranches
Also spelled: CLO