________ were designed to concentrate the credit risk of a bundle of loans on one class of investor, leaving the other investors in the pool relatively protected from that risk.
A) Stocks
B) Bonds
C) Derivatives
D) Collateralized debt obligations
E) All of the options

Question

Quizplus · Accepted Answer

Collateralized debt obligations (CDOs) were specifically designed to concentrate the credit risk of a bundle of loans on one class of investor, while other investors in the pool remained relatively protected from that risk. This is achieved through the tranching of securities, which prioritizes the distribution of payments and losses.

________ Were Designed to Concentrate the Credit Risk of a Bundle