Definition of 'Repackaging'
There are two main types of repackaging:
* Securitization: This is the process of creating a new security backed by a pool of assets. The new security is often called a mortgage-backed security (MBS) or a collateralized debt obligation (CDO).
* CDO squared: This is the process of creating a new security backed by a pool of CDO's. CDO squared's are often referred to as "toxic assets" because they are so risky.
Repackaging can be a useful tool for financial institutions, but it can also be dangerous. If the assets in the pool are not properly diversified, the new security can be very risky. This is what happened in the lead-up to the financial crisis of 2008, when many CDO's were backed by subprime mortgages.
Repackaging is a complex process, and there are many risks involved. It is important to understand the risks before investing in a repackaged security.
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