Financial Crisis Lexicon

April 27, 2010

Synthetic Collateral Debt Obligation (CDO) - Pool of assets, such as mortgages, that carries a varying degree of risk usually created by an investment bank. A more complete explanation is provided by Market Place.

Listen: This American Life's 2008 episode, "The Giant Pool of Money" discusses the importance of CDO's in the financial crisis.
Listen: Jesse Eisinger explains CDO's in an interview with Robin Young from April 20, 2010.

Credit Default Swap (CDS) - Insurance that covers bonds in the case of default or bankruptcy. A more complete explanation is provided by Market Place.

Still confused? Planet Money's blog breaks down credit default swaps in a 2008 post.
Listen: In a 2008 segment, All Things Considered takes a look at how the swaps contributed to the financial crisis..

Short Seller - Makes a profit by borrowing bonds, selling them and buying the bond back at a lower price. A more complete explanation is available from the Financial Times.

Naked Short Seller - Engages in the same sale and repurchase of bonds as a "short seller" but does so before securing the borrowed bond. A more complete explanation is available from the Financial Times.

Listen: Alex Blumberg provides a tutorial on short selling, both the nude and clothed variety for a 2008 Planet Money segment.

Tranche - A portion of a security that represents a certain level of risk. A more complete explanation is available at Investopedia.com.

This program aired on April 27, 2010. The audio for this program is not available.