Synthetic Debt Obligation (Synthetic CDO)
By definition, a Synthetic Collateralized Debt Obligation (Synthetic CDO) is a securitization of corporate obligations. It is a financially structured product using derivatives such as Credit Default Swaps (CDS) and underlying security/collateral (e.g. government bonds, asset backed securities, loans etc). Unlike traditional CDOs, which owns underlying corporate obligations outright, Synthetic CDOs achieve a similar exposure to these corporate assets by synthetically selling CDS. In such a CDS, the CDO receives a periodic payment from a counterparty that seeks protection against the default of a referenced asset. Operationally, a special purpose vehicle is used to structure a CDO and it can issue floating or fixed rate obligations tranched in a variety of ways with respect to seniority and payment. CDO obligations can have special features customized or tailor-made to investor requirements.

Collateralized Loan Obligation (CLO)
Collateralized Loan Obligation (CLD) generally refers to a type of bond structured or securitized by a financial institution (called an “Arranger”). This is achieved through establishing a bankruptcy remote, special purpose vehicle or entity. From the special purpose vehicle/entity, the trustee screens out, from the commercial loans of its holding, a portfolio of future cash flow and assets that have a specified credit quality, standardized characteristics (ex: terms, interest rates, creditor attributes, and ratio of loans to the values of collaterals), and diverse risks (ex: diverse debtors’ industries and/or regions) to serve as the basis or collaterals of the bonds. The portfolio is then regrouped and packaged through credit reinforcement or credit rating into unit or small amount securities. The securities are then issued through public or private offering to the general or specific investors.

(CBO) Collateralized Bond Obligation (CBO)
Collateralized Bond Obligation (CBO) is a grouping of multiple accounts of bonds issued as securities to investors after repackaging through arrangements of legal structure, cash flow, and credit rating mechanisms.