CDO & CLO itself doesnot give leverage, if I remember correctly?I remember CDO is about multiple tranches of the pool of debt obligations being rated differently from high to low and the re-payment of interests/principle use waterfall method.
How does the leverage step in?
maybe a large size fund concentrate their risks in one small size cdo?
say, 100m fund, 99m was safe, all the risk was in the last 1m tranche.I am not sure
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