Collateralized Debt Obligations CDO

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Definition of 'Collateralized Debt Obligations CDO'

Collateralized debt obligations are created by repackaging bonds that in turn are created from home loans. Until the summer of 2007 these CDOs carried triple-A (AAA) ratings and were thought of as "super-safe" investments.

Super-senior holdings are the highest-rated of all CDO bonds. When the Global Financial Crisis (GFC) hit the marked these plunged as subprime-mortgage defaults surged causing many banks for post record losses.

Citigroup, for example, had to get a $45 billion taxpayer bailout in late 2008.

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