By Glen McDermott, head of global structured bond research, Terry Benzschawel, and Adrian Lui, of Salomon Smith Barney

Because the multi-tranched investment structure of a CDO may not be flexible enough to address the objectives of some investors, the market has developed a class of structures called combination securities, whose return is derived from the cash flows of two or more underlying instruments, at least one of which is a CDO security.

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