What does CDO stand for in financial terminology?

The term CDO stands for Collateralized Debt Obligations. In financial markets, CDOs are structured financial products that pool together numerous debt instruments, such as mortgages, bonds, and other loans, and then repackaged into tranches that can be sold to investors. The tranches vary in risk and return, allowing investors to choose the level of risk they are willing to accept.

CDOs played a significant role during the financial crisis of 2007-2008, as they were often linked to mortgage-backed securities that experienced substantial defaults. Understanding CDOs is essential for grasping how financial instruments can create both opportunities and risks in investment portfolios.

The other options do not accurately reflect the standard meaning of the acronym CDO in the financial context, focusing instead on terms that do not have the same broad application or relevance in finance.