A Collateralized Debt Obligation (CDO) is a financial product that pools various types of debt, such as loans and bonds, and then sells them to investors. The cash flows from these debts are used to pay the investors, who receive returns based on the performance of the underlying assets. CDOs are typically divided into different risk categories, allowing investors to choose their level of risk. CDOs can include a mix of assets, such as mortgages, corporate bonds, and other loans. They are often structured in tranches, which means that different layers of the CDO have varying levels of risk and return. This structure allows for a more tailored investment approach for those interested in the debt market.