C选项

问题如下：

Which of the following statements about CDOs is correct?

选项：

A.

The collateral pools for CDOs are static.

B.

The proceeds to pay the CDO bond classes can only come from interest payments from collateral assets.

C.

A CDO is a leveraged transaction, where equity tranche holders use borrowed funds to generate a return above the funding cost.

解释：

The correct answer is C. A CDO is a leveraged transaction, where equity tranche holders use borrowed funds (i.e., the bond classes issued) to generate a return above the funding cost.

A is incorrect because unlike MBS, the pools in a CDO are not static; so, there is a need for a collateral manager that buys and sells debt obligations for and from the CDO’s collateral pool to generate sufficient cash flows to meet the obligations to the CDO bondholders.

B is incorrect because the proceeds to pay the CDO bond classes can come from interest payments from collateral assets, maturing of collateral assets, and sale of collateral assets.