Overview
Global CDO issuance has averaged $137 billion per year for the last three years.
In the context of asset-backed securities (ABS), this figure is about one-half of
public and private U.S. issuance. This sustained level of activity is remarkable,
given that annual volume never exceeded $4 billion until 1996. We estimate
outstanding CDO volume at $500 billion. The current status of CDOs is due to
the acceptance of the product by investors and credit risk hedgers.
This report is a comprehensive introduction to CDOs. It addresses:
the structural components of CDOs;
typical CDOs;
why CDOs exist;
the cash flow and market value credit structures;
synthetic CDOs;
the asset manager and other parties to a CDO;
legal, accounting, and tax considerations;
CDO terminology.