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Finance majors learn how to design investment portfolios and (one hopes) how not to destroy the global economy with collateralized debt obligations.
So it goes with collateralized debt obligations, or C.D.O.'s, which are bonds, loans and other assets that the Street pools together and sells as packages of securities.
And this is one example out of many games and tricks that can be played with collateralized debt obligations.
What did you think of the investment banks that had enormous write-downs because of their involvement with collateralized debt obligations ?
Cassidy noted that these issues had not been discussed in the past year because they were overshadowed by the problems with collateralized debt obligations and the subprime mortgage industry.
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"They took risk with those collateralized loan obligations," Mark Williams, who teaches finance at Boston University, says.
The proposal would provide a much-needed cash infusion but still leave bond insurers saddled with risky collateralized debt obligations assets and the possibility of rating downgrades.
Even the most sophisticated customers on Wall Street didn't have a clue how to evaluate the risks associated with the collateralized debt obligations being sold by Goldman Sachs.
The Company conducts its business through four primary segments: investments financed with non-recourse collateralized debt obligations (CDOs), investments financed with other non-recourse debt, investments financed with recourse debt, including Federal National Mortgage Association (FNMA)/ Federal Home Loan Mortgage Corporation (FHLMC) securities and unlevered investments.
It has been suggested that Goldman's collateral calls on its trading positions with AIG in collateralized debt obligations forced the insurer over the brink.
And then there was that whole unpleasantness with the stuffing of collateralized debt obligations with subprime junk handpicked by one client, John Paulson, for failure and sold to unsuspecting muppets.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com