Collateralized Debt Obligation (CDO)

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CDOs, or Collateralized Debt Obligations, are sophisticated financial tools that banks use to repackage individual loans into a product that can be sold to investors on the secondary market. These packages consist of auto loans, credit card debt, mortgages or corporate debt. They are called collateralized because the promised repayment of the loans are the collateral that gives the CDOs value.

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