Mohit Sewak

What is a Collateralized Debt Security (CDS) ?

Going by the dictionary meanings, Collateralized Debt Security or a CDS, should have meant any loan, or security, taken against a collateral (anything to back up a loan, for eg. an asset as a mortgage).

But in structured finance (a sector of finance that was created to help transfer risk using complex legal and corporate entities), we take this definition a step forward to call any security formed/ derived (these come under financial derivatives) as a result of securitization of such underlying mortgage backed loans/ debts/ fixed-income assets as CDS’s.
.

.

Therefore the technical definition of CDSs would be:

.

Collateralized Debt Securities (CDSs) are a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets.

.

.

Some other names by which these securities are called are (There can be minute or no differences among such terms which we will be discussing later, but broadly speaking they all mean the same thing):

.

Other Posts Related to Securitization:

.

1. What is Securitization?

2. What are CDO/CDS/CLO/ABS ?

3. What is a SPV/SPT/ SPE/SPC ?

4. TERIM model of Securitization.

5. Advantages and Disadvantages of Securitization for different Parties ?

6. How Securitization led to the Sub Prime Crisis ?

7. What are CDO² (CDO Squares), and CDO³ (CDO Cubes) ?

8. What is Tranching ?

9. Some Global facts and figures related to Securtization.

10. Problems with Structured Finance.

.

.

.

.

.

.

Please Share this article With Your Friends and Family On:

What is an Asset Backed Obligation (ABO) ?

Going by the dictionary meanings, Asset-Backed Obligation or an ABO, should have meant any loan, or security taken against any asset kept as a collateral (anything to back up a loan, for eg. a mortgage). But in structured finance (a sector of finance that was created to help transfer risk using complex legal and corporate entities), we take this definition a step forward to call any security formed/ derived (these come under financial derivatives) as a result of securitization of such underlying mortgage backed loans/ debts/ fixed-income assets as ABO’s.
.

.

Therefore the technical definition of an ABO would be:

.

An Asset-Backed Obligation is a security whose value and income payments are derived from and collateralized (or “backed”) by a specified pool of underlying assets.

This pool of assets is typically a group of small and illiquid assets that are unable to be sold individually.

.

.

Some other names by which these securities are called are (There can be minute or no differences among such terms which we will be discussing later, but broadly speaking they all mean the same thing):

.

Other Posts Related to Securitization:

.

1. What is Securitization?

2. What are CDO/CDS/CLO/ABS ?

3. What is a SPV/SPT/ SPE/SPC ?

4. TERIM model of Securitization.

5. Advantages and Disadvantages of Securitization for different Parties ?

6. How Securitization led to the Sub Prime Crisis ?

7. What are CDO² (CDO Squares), and CDO³ (CDO Cubes) ?

8. What is Tranching ?

9. Some Global facts and figures related to Securtization.

10. Problems with Structured Finance.

.

.

.

.

.

.

Please Share this article With Your Friends and Family On:

What is a Collateralized Loan Obligation (CLO) ?

Going by the dictionary meanings, Collateralized Loan Obligations or a CLO, should have meant any loan taken against any collateral (anything to back up a loan, for eg. an asset as a mortgage).

But in structured finance (a sector of finance that was created to help transfer risk using complex legal and corporate entities), we take this definition a step forward to call any security formed/ derived (these come under financial derivatives) as a result of securitization of such underlying mortgage backed loans/ debts/ fixed-income assets as CLO’s.
.

Therefore the technical definition of CLOs would be:

Collateralized Loan Obligations (CLOs) are a form of securitization where payments from multiple middle sized and large business loans are pooled together and passed on to different classes of owners in various tranches.

.

Some other names by which these securities are called are (There can be minute or no differences among such terms which we will be discussing later, but broadly speaking they all mean the same thing):

.

Other Posts Related to Securitization:

.

1. What is Securitization?

2. What are CDO/CDS/CLO/ABS ?

3. What is a SPV/SPT/ SPE/SPC ?

4. TERIM model of Securitization.

5. Advantages and Disadvantages of Securitization for different Parties ?

6. How Securitization led to the Sub Prime Crisis ?

7. What are CDO² (CDO Squares), and CDO³ (CDO Cubes) ?

8. What is Tranching ?

9. Some Global facts and figures related to Securtization.

10. Problems with Structured Finance.

.

.

.

.

.

.

Please Share this article With Your Friends and Family On:

What is an Asset Backed Security (ABS) ?

Going by the dictionary meanings, Asset-Backed Security or an ABS, should have meant any loan, or security taken against any asset kept as a collateral (anything to back up a loan, for eg.  a mortgage). But in structured finance (a sector of finance that was created to help transfer risk using complex legal and corporate entities), we take this definition a step forward to call any security formed/ derived (these come under financial derivatives) as a result of securitization of such underlying mortgage backed loans/ debts/ fixed-income assets as ABS’s.
.

.

Therefore the technical definition of an ABS would be:

.

An Asset-Backed Security is a security whose value and income payments are derived from and collateralized (or “backed”) by a specified pool of underlying assets.

This pool of assets is typically a group of small and illiquid assets that are unable to be sold individually.

.

.

Some other names by which these securities are called are (There can be minute or no differences among such terms which we will be discussing later, but broadly speaking they all mean the same thing):

.

Other Posts Related to Securitization:

.

1. What is Securitization?

2. What are CDO/CDS/CLO/ABS ?

3. What is a SPV/SPT/ SPE/SPC ?

4. TERIM model of Securitization.

5. Advantages and Disadvantages of Securitization for different Parties ?

6. How Securitization led to the Sub Prime Crisis ?

7. What are CDO² (CDO Squares), and CDO³ (CDO Cubes) ?

8. What is Tranching ?

9. Some Global facts and figures related to Securtization.

10. Problems with Structured Finance.

.

.

.

.

.

.

Please Share this article With Your Friends and Family On:

What is a Collateralized Debt Obligation (CDO) ?

Going by the dictionary meanings, Collateralized Debt Obligations or a CDO, should have meant any loan taken against any collateral (anything to back up a loan, for eg. an asset as a mortgage).

But in structured finance (a sector of finance that was created to help transfer risk using complex legal and corporate entities), we take this definition a step forward to call any security formed/ derived (these come under financial derivatives) as a result of securitization of such underlying mortgage backed loans/ debts/ fixed-income assets as CDO’s.
.

Therefore the technical definition of CDOs would be:

Collateralized debt obligations (CDOs) are a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets.

.

Some other names by which these securities are called are (There can be minute or no differences among such terms which we will be discussing later, but broadly speaking they all mean the same thing):

.

Other Posts Related to Securitization:

.

1. What is Securitization?

2. What are CDO/CDS/CLO/ABS ?

3. What is a SPV/SPT/ SPE/SPC ?

4. TERIM model of Securitization.

5. Advantages and Disadvantages of Securitization for different Parties ?

6. How Securitization led to the Sub Prime Crisis ?

7. What are CDO² (CDO Squares), and CDO³ (CDO Cubes) ?

8. What is Tranching ?

9. Some Global facts and figures related to Securtization.

10. Problems with Structured Finance.

.

.

.

.

.

.

Please Share this article With Your Friends and Family On: