Collateralized Debt Obligations (CDOs)

Joshua  Coval; Erik   Stafford

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Background Note | HBS Case Collection | January 2008

Collateralized Debt Obligations (CDOs)

by Joshua Coval and Erik Stafford

Abstract

This lesson integrated Merton's (1974) contingent claims model of debt and equity claims with the CAPM, which allows us to examine the risks and pricing of credit portfolios and the derivative claims issued against them. In particular, this model is used to make investment and risk management decisions in the market for collateralized debt obligations (CDOs).

Keywords: Decision Choices and Conditions; Borrowing and Debt; Credit Derivatives and Swaps; Investment Portfolio; Risk Management;

Format: Print

4 pages

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