An additional risk of an investment in an arbitrage collateralized debt obligation relative to an investment in

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An additional risk of an investment in an arbitrage collateralized debt obligation relative to an investment in an asset-backed security is:

A. The default risk on the collateral assets.

B. The risk that the CDO manager will fail to earn a return sufficient to pay off the investors in the senior and the mezzanine tranches.

C. The risk due to the mismatch between the collateral making fixed-rate payments and the bond classes making floating-rate payments.

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Fixed Income Analysis

ISBN: 9781119850540

5th Edition

Authors: Barbara S. Petitt

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Question Posted: Nov 04, 2023 11:10 PM

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An additional risk of an investment in an arbitrage collateralized debt obligation relative to an investment in

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B is correct In addition to the risks associated with investments in ABS such as the default ...View the full answer

Fixed Income Analysis

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