Collateralised debt obligation: Difference between revisions
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[[Collateralised debt obligation]] — three words which taken separately seem harmless and rather nice, but when put together convoke Satan and all his hellish angels of [[leverage]]. when bundled together and sliced up, make a [[CDO squared]] which really is the stuff of nightmares. | {{a|fwmd|{{CDO - FWMD}}}}[[Collateralised debt obligation]] — three words which taken separately seem harmless and rather nice, but when put together convoke Satan and all his hellish angels of [[leverage]]. when bundled together and sliced up, make a [[CDO squared]] which really is the stuff of nightmares. | ||
Can be made out of credit derivatives rather than actual loans — in which case it is a [[synthetic CDO]], or out of the junior tranches of other [[Collateralised debt obligation|CDO]]s they could not for some reason shift off the balance sheet, in which case it is a [[CDO squared|CDO ''squared'']]. Doesn’t sound like a good idea, huh? Wasn’t. This didn’t stop Rating Agencies rating them triple A! | |||
That didn’t stop them from doing CDOs of [[CDO squared]]s, which were, of course, CDO ''cubed'' — or Rating Agencies rating ''them'' triple A. | |||
Who would have thought, a few short months later, the entire financial system would collapse? | |||
{{sa}} | {{sa}} | ||
*[[CDO²]] | |||
*[[Credit derivatives]] | *[[Credit derivatives]] | ||
*[[Financial weapons of mass destruction]] | *[[Financial weapons of mass destruction]] | ||
Latest revision as of 20:28, 24 September 2024
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Financial Weapons of Mass Destruction™
A guide to the tools of our trade.
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Collateralised debt obligation — three words which taken separately seem harmless and rather nice, but when put together convoke Satan and all his hellish angels of leverage. when bundled together and sliced up, make a CDO squared which really is the stuff of nightmares.
Can be made out of credit derivatives rather than actual loans — in which case it is a synthetic CDO, or out of the junior tranches of other CDOs they could not for some reason shift off the balance sheet, in which case it is a CDO squared. Doesn’t sound like a good idea, huh? Wasn’t. This didn’t stop Rating Agencies rating them triple A!
That didn’t stop them from doing CDOs of CDO squareds, which were, of course, CDO cubed — or Rating Agencies rating them triple A.
Who would have thought, a few short months later, the entire financial system would collapse?