Glossary

Collateralised Debt Obligation (CDO)

A well-known product in structured finance whose value and payments are backed by a pool of fixed income assets. The securities in a CDO are divided into different tranches, with each slice having a different maturity and risk profile. Senior tranches are the safest, most expensive type, so pay the least, and vice versa for junior tranches, which pay out a higher coupon to compensate for the higher default risk.