Which of the below statements is TRUE?

Question

Quizplus · Accepted Answer

Collateralized loan obligations (CLOs) and collateralized bond obligations (CBOs) are both examples of CDOs. A CDO is a security that is backed by a pool of debt obligations, which can include loans, bonds, or other forms of debt. The collateral manager is responsible for managing the portfolio of debt obligations, and the funds to purchase the assets for a CDO are obtained from the sale of securities, which may include senior tranches, mezzanine tranches, and subordinate/equity tranches. Option A is incorrect because a CDO can be backed by a diversified pool of debt obligations, not necessarily non-diversified. Option B is incorrect because the collateral manager is responsible for managing the portfolio. Option D is incorrect because all tranches of a CDO can be sold to fund the purchase of assets.

Which of the Below Statements Is TRUE