2.2 What are CDOs?
A pool of bank credit assets and its associated risk-reward profile
Collateralized Debt Obligations (CDOs) are structured financial products that pool together various types of bank-intermediated credit assets. In laymens, its a bet that the banks' clients will not default on interest payment obligations. The types of credit assets referenced by $BRICS include:
Syndicated Loans: Large loans extended by multiple affiliate banks to corporations. These are used in leveraged buyouts (LBOs) and mergers/acquisitions.
Mortgage Loans
Residential Mortgage Loans (RMBS): Home loans extended to individuals.
Commercial Mortgage Loans (CMBS): Loans secured by income-generating commercial properties, such as offices, shopping centers, and hotels.
Trade Receivables: Short-term receivables generated from trade credit extended by banks to companies for working capital. These assets are relatively low-risk and core to ChinaAI's public launch offering. Find a list of local and international companies referenced here.
Infrastructure Loans: Loans extended to finance public infrastructure like roads, bridges, and energy plants. These loans often have long maturities and stable cash flows, making them attractive for securitization.
Consumer Loans
Auto Loans: Loans for vehicle purchases, pooled into 'Auto Loan-Backed Securities'.
Credit Card Receivables: Revolving consumer credit, securitized into Asset-Backed Securities (ABS).
Small and Medium Enterprise Loans: extended to SMEs and pooled together.
Student Loans: Loans to individuals for educational purposes, securitized into Student Loan-Backed Securities.
Project Finance Loans: Loans specifically structured for large-scale projects (e.g., renewable energy, real estate development) with predictable cash flows tied to project performance.
The remainder of this note limits the scope of CDOs to Trade Receivables as the instrument of focus for the protocol's public launch.
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