Arbitrage, super-senior and single-tranche CDOs
As the CDO technology has progressed, different types of CDOs have evolved, catering to investors with varying risk tolerances
The basic technology of CDOs has appealed to a range of other market practitioners extending well beyond banks. In many cases, these other practitioners are attracted by the opportunities that CDO technology has opened up for regulatory capital relief.
Arbitrage CDOs
The stable companion of the balance sheet CDO is the arbitrage CDO, which is generally used by investment banks or specialist management companies as a highly efficient mechanism for capturing the spread difference between collateral
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