This week we learned about different fixed income markets (money markets, bond markets, loan markets, mortgages...). Additionally, we also learned the mechanics of collateralized mortgage obligations and collateralized loan obligations.

In this forum discuss the collateralization process and the reasons underlying the decisions by financial institutions to collateralize their loan portfolios. Think about how this process creates a wide dispersion of risks associated with this type of assets beyond their origination point.

Furthermore, consider the growth and size of CLO of leveraged loans (loans to highly indebted companies) as a source for triggering another financial crisis when a conflation of events such as a deterioration in the economy, deflation of asset prices and rising risk of default, etc. occur. Evaluate the extent of interconnections within the financial industry that can magnify risks to the financial system.