A general term used to refer to chemical compounds produced by industry which, if they are ingested or breathed in by humans, can cause physiological damage. The disposal of toxic wastes is a major environmental problem in the United States.
Toxic Waste
A slang term referring to securities that are unattractive due to certain underlying provisions or risks making them generally illiquid with poor pricing schemes and transparency.
Investopedia Commentary
Mainly used in reference to CMOs, toxic waste represents the small portion of these products that are byproducts created as a result of providing the majority of CMOs with minimal risk. In effect, this small portion of byproducts is used as outlets for transferring a substantial portion of the underlying risks involved in making the obligations and then marketed to investors.
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See also: CMO, Mortgage Backed Securities, Pass-Through Security, Structured Finance, Tranches