What is Abacus CDO?
The Abacus CDO was the securitization of a bunch of CDS positions (if it has cash flow, it can be securitized). The Abacus CDO was selling CDS protection on a bunch of dodgy mortgage-backed securities.
Do CDO squared still exist?
Since consumers stopped making financing payments for many of the assets backing the collateralized debt obligations and therefore the collateralized debt obligations squared, the CDO and CDO-squared market collapsed during the 2008 global financial crisis.
What is the difference between a CDO and a synthetic CDO?
While a traditional CDO generates income for the seller from cash assets like loans, credit cards, and mortgages, the value of a synthetic CDO comes from, for example, insurance premiums of credit default swaps paid for by investors.
What is Abacus deal?
In Goldman’s Abacus deal, the CDOs owned credit-default swaps that would rise or fall depending on the fortunes of a specific list of residential mortgage-backed securities, mainly on subprime loans to homeowners who are considered risky.
Who is CEO of Goldman Sachs?
David M. Solomon (Oct 2018–)Goldman Sachs / CEO
Who bet against the housing market?
Michael Burry, the contrarian investor of “The Big Short” fame, shared some of the early research that underpinned his billion-dollar bet against the US housing bubble in the mid-2000s.
What is a CDO simple explanation?
A Collateralized Debt Obligation (CDO) is a synthetic investment product that represents different loans bundled together and sold by the lender in the market. The holder of the collateralized debt obligation can, in theory, collect the borrowed amount from the original borrower at the end of the loan period.
How did Michael Burry short housing?
Burry creates a new sort of financial instrument, called a credit default swap, which would allow him to short the housing market—that is, sell positions, on the assumption that housing prices will drop.
Do banks still use CDOs?
Today, CDOs have returned, although the playing field is a bit different. According to a White & Case examination of collateralized loan obligations (CLOs) – a similar class of investments to CDOs – 2021 was a great year for the CLO market.
What are CDOs called now?
A bespoke CDO is now more commonly referred to as a bespoke tranche or a bespoke tranche opportunity (BTO).
What is a CDO in the big short?
Anthony Bourdain then explained CDOs (collateralized debt obligation) through the analogy of seafood. A CDO moulds together assets such as bonds, car loans, credit card loans, and mortgages to sell to investors.