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작성자귀요미 조회 14회 작성일 2021-11-30 22:17:58 댓글 0

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What are Collateralized Debt Obligations (CDOs)?

Let's take a look at Collateralized Debt Obligations, or CDOs, and also take a look at something called a Credit Default Swap.

Watch the full video about mortgage-backed securities here:


CDOs are types of mortgage-backed securities. In the example we posed before, MBS are simple shares of a company where every share gets the same amount back. CDOs are still shares of that company, but they have different levels of how much you get back, called tranches. Let's say the Investment bank wanted to split Big Mortgage Corp into 3 tranches: Equity, Mezzanine, and Senior. These are the actual names used in the industry. Each tranche, or level, holds a handpicked number of shares from Big Mortgage Corp.

Equity is the lowest level, highest risk but highest return. They hold the shares of the riskiest mortgages. If borrowers default, holders of equity level CDOs are the first to feel the pain. However, if borrowers do end up paying up, the Equity tranche gets back the most money. For example, rather than 5%, let's say they get back 7.5% on their investment. If you want to take the risk, it could pay off!

The next level is Mezzanine. These are the middle of the road CDOs. Moderate risk and moderate risk of default. Let's say they get back 5% of their investment.

The safest level is the Senior Tranche. They hold very little risk but get lower return. If a ton of borrowers default, Big Mortgage Corp is going to underpay Equity and Mezzanine tranches to make sure the Senior tranche get's their money. However, the Senior Tranche let's say only earns a 3.13% interest rate.

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Concerning Reality : This is part of the longer video we put out on Mortgage-Backed Securities. If you're interested in the topic, watch the full video here:

souphiane : you sir just made sure my primate brain finally understands these difficult systems. you earned my subscription, I look forward to more of your videos <3
Bird is da Word : Nice and To-The-Point content, Sir...
I think in 2008 Hank Paulsen lost his marbles only when he saw AIG fail... It would have become an international scandal and the pressure on the USA would have been beyond immense...
subscribed
TeenCred : You even said it in the end, but DAMN did you explain what the "Big Short" was all about perfectly! For a while, I was still not sure why the banks were scoffing at the protagonists for buying CDS's.
Pedales Mexicali : This is gold. I’ve probably watched about 10 videos about CDS and DCO and I love how you use examples we understand, like “betting against your neighbor who is a terrible driver.”

What is a CDO, CDO squared, Synthetic CDO and how did the 2008 crisis happen

Short description of CDO (Collateralized Debt Obligation) and what caused the 2008 collapse --- 5 trillion dollars in pension money, real estate value, 401k, savings, and bonds had disappeared. 8 million people lost their jobs, six million lost their homes. And that was just in the USA.

#Finance
#CDO
#Financialcrisis
#Collateralized
Mark - : This just reinforces how insulated big banks and government officials are from any consequences. I'm sure the Mafia is deeply envious of this kind of high level organized crime, especially when the U.S. taxpayer is willingly paying for all of it.
Willysmb44 : Any organization does this. They tell the employees to game the system. And when they do, to get good ratings at work to compete, THIS is the kind of thing that happens. And that happens everywhere, every single day.
ousooners23 : This movie was really good , being in my early 20s I learned a lot from this movie lol
GentlemanS : Why does this not viral? It's a perfect description of everything.
Paul L. : Aside from this accurate insight, once you know this it's important to realize the urgency of BUYER BEWARE and also EACH ONE TEACH ONE to educate yourself and help people you care about, since clearly no bankers got penalized and regulations are a joke. Hence, the shadiness continues on Wall Street. I mean shit, Bespoke Tranche Opportunities just replaced CDO's. Tread lightly with anything bank related.

Collateralized debt obligation overview | Finance & Capital Markets | Khan Academy

How CDOs can give different investors different levels of risk and returns with the same underlying assets. Created by Sal Khan.

Watch the next lesson:
https://www.khanacademy.org/economics-finance-domain/core-finance/derivative-securities/cdo-tutorial/v/collateralized-debt-obligation-cdo?utm_source=YT\u0026utm_medium=Desc\u0026utm_campaign=financeandcapitalmarkets

Missed the previous lesson? Watch here:
https://www.khanacademy.org/economics-finance-domain/core-finance/derivative-securities/mort-backed-secs-tut/v/mortgage-backed-securities-iii?utm_source=YT\u0026utm_medium=Desc\u0026utm_campaign=financeandcapitalmarkets

Finance and capital markets on Khan Academy: Interest is the basis of modern capital markets. Depending on whether you are lending or borrowing, it can be viewed as a return on an asset (lending) or the cost of capital (borrowing). This tutorial gives an introduction to this fundamental concept, including what it means to compound. It also gives a rule of thumb that might make it easy to do some rough interest calculations in your head.

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User498578493 : I've got an interview next week and this has been super helpful. The visual examples put everything into place. Thanks!
Ankush Singhal : Awesome video. Explains the CDO/CMO very well. Saved me reading the chapter to understand the concept. 
Mickey Goldmill : Really helpful. Thank you Sir.
Isomer Soma : By far the best explaination i have seen.
Aashish Alm : THAAAANKS MAAN - couldnt get it for hours and now I understood it in 4 mins

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#cdo

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