CFA Level I · CFA Level I Exam · Asset-Backed Security (ABS) Instrument and Market Features
In a collateralized debt obligation (CDO) structure, the entity that issues the tranches and holds the pool of debt obligations as collateral is best described as the:
The issuer of a CDO is a special purpose entity. It acquires the pool of debt obligations as collateral and sells tranches of securities against it. The collateral manager only runs the portfolio, and a servicer only collects payments, so neither is the issuing entity.
- Aservicer
- Bspecial purpose entityCorrect
- Ccollateral manager
Explanation
A CDO is issued by a special purpose entity that buys the collateral pool and issues tranches backed by it. The collateral manager selects and manages the portfolio, and a servicer collects payments on loans, but neither is the issuing vehicle.
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