A collateralized debt obligation (CDO) is a complex financial product that is backed by a pool of loans and other assets and sold to institutional investors. CDOs are a type of structured asset-backed security that can be thought of as a promise to pay investors in a prescribed sequence, based on the cash flow the CDO collects from the pool of bonds or other assets it owns. The underlying assets in a CDO can include loans, mortgages, bonds, and other debt types, which are rated by risk and combined into the CDO to create a product that balances risk with reward. CDOs are considered derivatives since their prices are derived from the performance of the underlying bonds and loans. The CDO is "sliced" into sections known as "tranches," which "catch" the cash flow of interest and principal payments in sequence based on seniority. If some loans default and the cash collected by the CDO is insufficient to pay all of its investors, those in the lowest, most "junior" tranches suffer losses first. The last to lose payment from default are the safest, most senior tranches. The tranches of CDOs indicate the level of risk in the underlying loans, with senior tranches having the lowest risk. CDOs backed by risky subprime mortgages were one of the causes of the financial crisis between 2007 and 2009. Although risky and not for all investors, CDOs are a viable tool for diversifying risk and creating more liquid capital for investment banks.