CDO structure

--there is an asset manager responsible for managing the portfolio of debt obligations --the fund to purchase the underlying assets are obtained from the issuance of debt ogligations (tranches) --the proceeds to meet the ogliations to CDO tranches can come from a. coupon interest payment of underlying assets, maturing assets in the underlying pool and sale of asset in the underlying pool Cash or Market CDO - actively managed portfolio --asset manager invest in fixed rate bonds, tranches pay floating rate, resulting in mismatch. --coverage test need to be paid...if all test passed, principal will be reinvested... --cash CDO is ensure cash sufficient to meet the obligations of the tranches --market CDOs generate trading profits to satisfy a portion of the obligations to the tranches