Collateralized Debt Obligation (CDO)

    A collateralized debt obligation (CDO) is a complex financial product that is typically backed by a pool of loans and different types of assets that are sold to institutional investors. CDOs are a type of derivative in which the value is derived from other underlying assets that become collateral if the initial loan fails. CDOs are risky in and of themselves, but they are a useful tool for freeing up capital and reducing risk for investors.