arbitrage CDO

arbitrage CDO
A CDO whose purpose is to allow a money manager to expand assets under management and equity investors to achieve non-recourse leverage to CDO assets. There is no " arbitrage" in the classic sense of the word. Rather, equity holders hope to capture the difference between the after-default yield on the assets and the financing cost due debt tranches.
See collateralized debt obligation ( CDO). American Banker Glossary

Financial and business terms. 2012.

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