Series 7 Exam Tip

Collateralized debt obligations or CDOs are securities backed by pools of underlying debt instruments. Similar to collateralized mortgage obligations or CMOs, CDOs  represent an interest in the underlying pool of of securities and can be back by such things as a pool of auto loans or credit card debt portfolios.  As the owners of the automobiles and holders of credit cards with an outstanding balance make payments, the payments flow into the underlying pool and are then distributed on a predetermined basis to the holders of the CDOS. CDOs are generally to sophisticated for individual investors and are more appropriate for institutional investors such as hedge funds and other large investors who can understand the risks associated with the underlying portfolios. Take some free series 7 exam questions on our site at:

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