A Synthetic CDO (Collateralized Debt Obligation) is a financial instrument that allows investors to gain exposure to a portfolio of credit risk without owning the underlying assets. Instead of holding actual loans or bonds, a Synthetic CDO uses derivatives, such as credit default swaps, to simulate the cash flows and risks associated with these assets. This structure enables investors to speculate on or hedge against credit events, like defaults. Synthetic CDOs can be complex and carry significant risks, as they are often linked to the performance of various underlying securities. They gained notoriety during the 2008 financial crisis, when many investors faced substantial losses due to the collapse of the housing market and related securities, highlighting the potential dangers of such financial products.