CDO squared financial definition of CDO squared
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Having a single number like the correlation coefficient to estimate risk greatly simplified the problem of determining risk and led to an enormous growth in CDOs--and not only CDOs, but bundles of them known as CDO squared
or CDO2 or even higher powers.
"Complex products, such as CDO squared
, have such a remote link from the asset that you can't tell when it is defaulting.
"The really complex products like CDO squared
, which has such a remote link from the asset that you can't tell when it is defaulting, can't happen in Islamic finance because debt cannot qualify as an asset," said Dubai-based law firm Clifford Chance head of capital markets Debashis Dey.
"The CDO squared
bonds are made up of middle or mezzanine tranches of the CDO asset-backed securities and are also sold in tranches," Dinallo said.