CDO is a type of bond that backed by loan, mortgages or debt and repackage into security and carry to investors. Below is the diagram that shows the CDO system:
First, borrower whose asked to borrow money to finance their newly secure house will look for mortgage broker whos expertise on sourcing lender who offer the lowest occupy pace and pair them together.
After that, lender will carry their loan to issuer which will make a full compensation for the loan. When borrowers start to service their loan, they will pay directly to the issuer. in that location are incentives for lender as it freed up more superior and able to lend more to borrower and generate more revenue. So, this do by will keep on continue.
So, issuer will gather the loans and repackage into bonds and transmit to investor. Issuer has the incentive as they earn through the management lean and admin fee.
But before they can sell to investor, they will contain rating agency, underwriter and trustee expertise.
Rating agency is those who rate bond and ancestor on their credit quality and beget a grade range from AAA, C or D. much(prenominal) as Moodys, Standard & Poors and Fitch are the recognized agencies in the world. After creation rated, issuer will pass to underwriter for selling process.
Underwriter is those who sell the bond to the investors. They will ensure that all bonds are exchange and such underwriters usually are merchant banks like DBS, Citibank, UOB or Standard Charter which they have huge client base network.
After sale process, issuer will engage trustee who is handles...If you want to get a full essay, order it on our website: Ordercustompaper.com
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