Meaning of CDO-cubed | Babel Free

Definitions

A type of CDO (collateralized debt obligation) that invests in CDO-squareds.

Examples

“Given the number of CDO Squared transactions in the marketplace, and the continued narrowing of corporate spreads, the emergence of CDO Cubed could be regarded as almost inevitable.”

“But what if you can't sell all the bottom tranches of the CDO-squared securities? You guessed it. You form another pool of those untouchables—called a CDO cubed—and tranche away again.”

“A CDO squared is a CDO that only uses other CDOs as collateral. The CDO cubed is a special purpose vehicle with securitization payments in the form of tranches. A CDO cubed is backed by CDO squared tranches, allowing the banks to resell the credit risk they had taken once again by repackaging their CDO-squared.”

CEFR level