64 天准备2011 11月FRM 一级& 二级 (个人复习进度念经贴，不喜勿入)

I am no expert of structured finance. But I'd like to quote the answer from an expert and hope it is helpful:  

"Very interesting question, since CDO/CLO & ABS overlap a lot.... I am sure you would have got an overall idea looking at the answers above. But I will call-out some of the fine differences between them -
- ABS means a collection of assets that act as a collateral i.e. Credit Card, Student loans, Auto-loans, Small Business loans, HELOC, manufactured homes etc. You may also have some "exotic" receivables such as - Tobacco litigation, Recreational vehicles, Royalty bonds, etc

- Whereas a Collateralized debt obligation is a securitization of a pool of **leveraged** loans, structured product securities, or other financial collateral. The CDO issuer typically is a bankruptcy-remote special purpose vehicle that issues various classes of rated term debt (with ratings ranging from triple-A to non-investment grade) and un-rated equity in the capital markets. Whereas in a ABS they are usually have high rated collaterals i.e. AAA (only ~10-15% are single-A or BBB)

(1) So the key difference is the underlying collateral - physical assets receivables (ABS) .vs. a manufactured assets (aka structured product) from usually leveraged, distressed assets. In simple terms, the CDO issuer borrows money in the capital markets and then attempts to invest the money at higher spreads

(2) Since CDO/CLO is "manufactured" ….an experienced investment professional, the collateral manager, actively manages the CDO’s collateral portfolio ...for simplicity you can consider this CDO/CLO management similar to hedge funds (water-mark, mgmt fee, performance fee, etc). But a key difference here is you will have two types of investors (investing in various tranches).... low risk investors (debt/superior/mezzanine) and high risk investors (subordinated/equity)

(3) As you may have realized from the above point a very important difference is CDO/CLO have an investment lifecycle - (a) where a investment manager would purchase and park these assets in a warehouse (b) getting bridge loan (c) Once s(he) finds investors moves these assets out of the warehouse (d) there will usually be a reinvestment period (3-5yrs) where the investment manager would manage the investment portfolio..So on ….until the investment gets matured

Hope this helps to get a better understanding of the difference
Forgot to write... a key constituent(collateral) in CDO/CLOs are commercial papers (deposits, loans) which cannot be found in an ABS

Rajasimha Makaram"

请教楼主，what is structured finance as I read this word many times in Level I notes?

jiayou