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Talk Your Book: Floating Rate Income

Animal Spirits Podcast

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Understanding Collateralized Loan Obligations

This chapter explores the structure and function of collateralized loan obligations (CLOs) in finance, highlighting their floating rate interest payments and risk profiles through various tranches. It analyzes CLO performance during economic shifts, particularly in the 2022 bond bear market, and discusses the strategies investors adopt to manage risks associated with credit and liquidity. The complexities of the CLO market, including the impact of interest rates and credit events on different tranches, are also examined.

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