About the Collateralized Debt Obligation (CDO) Market
CDO refer to the securities that are packaged as one unit and serves as collateral for investors. The packaged assets comprise the corporate debt, mortgages, credit card, or automotive loans that are otherwise individual fixed income assets, which are sold on the secondary market.
CDO allows banks and large corporations to sell off their debt, freeing up capital to make a reinvestment or take a loan; however, the loan originators have less incentive to collect when the loans are due in the package as these debts are not owned by other investors. This leads to less disciplined approach in adhering to strict lending standards.
Technavio’s analysts forecast the global collateralized debt obligation (CDO) market to grow at a CAGR of 5.02% during the period 2016-2020.
Covered in this report
The report covers the present scenario and the growth prospects of the global collateralized debt obligation (CDO) market for 2016-2020. To calculate the market size, the report considers the total outstanding collateralized debt obligation from the Americas, APAC, and EMEA.
The market is divided into the following segments based on geography:
Technavio Announces the Publication of its Research Report – Global Collateralized Debt Obligation (CDO) Market 2016-2020
Technavio recognizes the following companies as the key players in the global collateralized debt obligation (CDO) market: Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase.
Other Prominent Vendors in the market are: Barclays, BNP Paribas, Deutsche Bank, HSBC, Morgan Stanley, Royal Bank of Scotland, Société Générale S.A., SunTrust Bank, UniCredit, and Wells Fargo.
Commenting on the report, an analyst from Technavio’s team said: “A trend which is playing a key role in market growth is the collateralization of derivatives. Central clearing was introduced in the repo and the derivatives market. Collateral management is one of the important domains for the market participants because of the growing advances in technologies. This has helped the participants in reducing the funding costs and the counterparty risk. Many regulations in the financial industry domain have led to the introduction of derivatives legislation and centralized clearing of derivatives. Many financial institutions like the banks are focusing on the transparency of the collateral that is available to the market participant by putting more focus on the efficient decision-making process. Banks are also trying to reduce the operational risks that are involved in a collateral transaction by monitoring the credit policies and by controlling the credit risk.”
According to the report, a key driver of market growth is the increased integration of financial markets. The growth in the integration of financial markets helps in increasing the liquidity in the equity market. Integrated financial markets help domestic investors buy foreign assets and foreign investors to buy domestic assets, reducing the risks involved.
We find that the regulatory changes have no impact on the functioning of the capital market because the involvement of different international markets has led to an efficient global allocation of savings for future use. This helps different countries create an opportunity for portfolio diversification, sharing of the risks, enhance the growth, and raise the standard of living. Therefore, it is important to focus on the market integration through various capital flows in different international markets, various co-movements of returns, and liquidity position of different markets.
Further, the report states that one challenge that could hamper market growth is the insufficient risk management and risk valuation capabilities.
Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Barclays, BNP Paribas, Deutsche Bank, HSBC, Morgan Stanley, Royal Bank of Scotland, Société Générale S.A., SunTrust Bank, UniCredit, Wells Fargo.
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