A cash CDO which allows the pool manager to trade the pool collateral in order to maintain the market value of the collateral at a level that is sufficient to pay the promised coupon and principal obligations of CDO tranches. The underlying collateral of the cash CDO structure can be actively traded at market value (i.e., marketed to market periodically), and therefore its value varies over time. Market value CDOs depend on the manager’s ability to generate returns and liquidate the assets when necessary to meet the promised payments. This is usually the case when the market value of the collateral pool falls below a specific threshold level, which corresponds to the amount of outstanding CDO tranches, prompting asset liquidation to ensure the solvency of the entire structure.
Finance
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