Free Trial

Safari Books Online is a digital library providing on-demand subscription access to thousands of learning resources.

  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL
Help

Chapter 13: Collateralized Debt Obligati... > Different Structural Types of CDOs

Different Structural Types of CDOs

There are many types of CDOs in the marketplace and they are generally classified according to their structure, underlying asset trading restrictions (although the underlying assets are actively managed by the sponsor, there are safety rules for the manager to follow in managing the assets), and motivation for issuing the transaction. Structurally, there are four types of CDOs: cash flow CDOs, synthetic CDOs, market value CDOs, and hybrid CDOs.

Cash Flow CDOs

A cash flow CDO is a transaction where the sponsor or the collateral manager creates an SPE that purchases debt securities and simultaneously funds the purchase by issuing notes to the investors. This structure is similar to the example cited in the previous section. As mentioned earlier, one fundamental difference between a CDO and an ABS is that the CDO has a professional money manager—who is a sponsor (or designated by the sponsor)—who creates the SPE to issue the CDO securities. The collateral manager reports to the trustee of the SPE on the management of the underlying assets as an investment portfolio.


  

You are currently reading a PREVIEW of this book.

                                                                                                                    

Get instant access to over $1 million worth of books and videos.

  

Start a Free Trial


  
  • Safari Books Online
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint