investment vehicle</strong></a>. The fund is partially owned by every contributor. Institutional investment funds are typically managed by employing the commingled fund model.</p>\n<p>There are numerous benefits to adopting commingling in investment. Fund managers who rely on pooled funds can lower trading costs since it’s possible to trade using larger <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-block/">blocks./nFurthermore, investors can find the scale of commingled funds advantageous since the larger money pool allows them to access a broader range of investments which typically require a large buy-in. Another advantage is the opportunity to receive better investment returns than through an investment vehicle that separates the funds.</p>\n<p>For individual investors, commingled funds ensure <strong>lower brokerage fees</strong>. Paying the broker’s fees via the commingled fund rather than individually is more cost-efficient since there is no need to hire additional investment managers.</p>","level":"easy","meta_title":"What is Commingling? Definition & Meaning | Crypto Wiki","meta_description":"Commingling meaning: Commingling - a process of pooling all funds from different investors into one investment to maximize their benefits.","meta_keywords":null,"language":"en","created_at":"2022-02-23T14:45:07.000000Z","updated_at":"2022-05-13T14:32:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-commingling"},"prevSection":{"id":181,"original_id":null,"author_id":41,"translator_id":null,"title":"What is Collateralized Mortgage Obligation (CMO)?","slug":"what-is-collateralized-mortgage-obligation-cmo","section":"C","keyword":"Collateralized Mortgage Obligation (CMO)","status":"published","definition":"a package of mortgage bundles sold to investors.","content":"<p>A <strong>collateralized mortgage obligation (CMO)</strong> is a <strong>collection of multiple mortgages</strong> that are bundled together as a <strong>package</strong>. The package is offered to investors as a way for a bank to gain some <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-liquidity/">liquidity. It is a mortgage-backed security measure. In turn, investors get collateralized loan packages as well as all future loan repayments.</p>\n<p>CMOs are considered to be versatile investments. However, they are considered risky for the purchasers. Since they are made up of several different mortgages, there is a high chance that one of them may be <strong>defaulted</strong>, meaning that the borrower failed to return the entire loan. For this reason, CMOs are seen as some of the riskiest financial investments.</p>\n<p>A CMO provides an investor with significant collateral value. This means that if an investor owns a CMO containing seven mortgage loans taken out by different customers, they will either receive repayments of all loans or claim ownership of the collateral from the defaulted loans. Thus, CMOs are seen as a viable strategy for diversifying investment portfolios.</p>\n<p>CMOs were prominent prior to the <strong>2008 global financial crisis</strong>. The primary cause of the financial crash in the US and the rest of the world was an influx of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-collateralized-debt-obligation/">collateralized debt obligations (CDOs)</strong></a> being defaulted. CDOs function similarly to CMOs; however, they also allow banks to bundle up other credits alongside mortgage loans.</p>\n<p>Since it was becoming increasingly difficult for borrowers to pay their monthly loan installments, many loans in the CDOs were defaulting. This led to a housing market crash and a sudden fall of property value. Many borrowers lost the property they took the loans for, while institutional investors saw massive financial losses.</p>\n<p>After the financial crisis, stricter regulations were put in place to manage CDOs and CMOs. Despite the consequences of the 2008 crisis, CMOs have remained a lucrative investment opportunity. Thanks to regulatory improvements and stricter bank regulations, the housing market has corrected its course and CMOs have started to regain their value.</p>","level":"medium","meta_title":"What is Collateralized Mortgage Obligation (CMO)? Definition & Meaning | Crypto Wiki","meta_description":"Collateralized Mortgage Obligation (CMO) meaning: Collateralized Mortgage Obligation (CMO) - a package of mortgage bundles sold to investors.","meta_keywords":null,"language":"en","created_at":"2022-02-23T14:33:09.000000Z","updated_at":"2022-05-13T14:32:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-collateralized-mortgage-obligation-cmo"},"currentChapter":"C","currentSection":"what-is-collateralized-stablecoin","chapterTitle":"C","readingLevel":"easy"},"url":"/crypto/learn/crypto-terms/what-is-collateralized-stablecoin","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0"> Crypto Terms: Letter C
What is Collateralized Stablecoin?
Collateralized Stablecoin MEANING:
Collateralized Stablecoin -
a stablecoin that is partially or entirely backed by collateral.
Let's find out Collateralized Stablecoin meaning, definition in crypto,
what is Collateralized Stablecoin,
and all other detailed facts.
A collateralized stablecoin is a type of stablecoin that is partly or entirely backed by collateral that is held in a reserve. Stablecoins are blockchain-based digital assets that have their price pegged to a specific asset, at a designated price. This can be the value of assets like gold or fiat currency like the US dollar. For example, 1 Tether (USDT) is worth 1 USD.
The backing is required for a stablecoin to maintain its legitimacy and utility as a payment method. The backing used for stablecoins is known as collateral.
Some of the best-known examples of fully-collateralized stablecoins are Tether (USDT), USD Coin (USDC), and DAI; the latter is generated via the collateralized debt position (CDP). The collateral allows token holders to redeem them for US dollars or other assets which can be used in the traditional market.
Collateral used for stablecoins can take different forms, like cash, commercial papers, or bond purchases. The collateral can be used for further investment opportunities and help improve capital efficiency.
Decentralized stablecoins are cryptocurrencies that commit their collateral solely to on-chain assets instead of traditional financial assets.
Collateralized stablecoins require immense amounts of capital to maintain trust and legitimacy. Their stability directly depends on the collateral they are pegged to. In order to minimize value fluctuations, many collateralized stablecoins must be overcollateralized.
Unlike collateralized stablecoins, algorithmic stablecoins like RAI, FEI, or FRAX use smart contracts to maintain stable supply and value. These smart contracts manage the supply and maintain the pegged value stable by buying, selling, and, when necessary, burning tokens.
