A collateralized debt obligation (CDO) is a financial product that pools together various types of debt, such as loans and bonds, and then sells them to investors. These debts are grouped into different categories based on their risk levels, allowing investors to choose the level of risk they are comfortable with. The income generated from the underlying debts is then distributed to the investors in the CDO. CDOs can be complex, but they essentially allow investors to gain exposure to a diversified portfolio of debts. They became widely known during the 2008 financial crisis, when many CDOs lost value due to rising defaults on underlying loans, particularly in the housing market, which was heavily influenced by the subprime mortgage crisis.