Toxic Waste
A slang term referring to securities that are unattractive due to certain underlying provisions or risks making them generally illiquid with poor pricing schemes and transparency. Investopedia Says:
Mainly used in reference to CMOs, toxic waste represents the small portion of these products that are byproducts created as a result of providing the majority of CMOs with minimal risk. In effect, this small portion of byproducts is used as outlets for transferring a substantial portion of the underlying risks involved in making the obligations and then marketed to investors. Related Terms:
Collateralized Mortgage Obligation - CMO
Mortgage Backed Securities
Pass-Through Security
Structured Finance
Tranches |