1. Definition of CDO (collateralized debt obligation):
"An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds."
"A credit default swap (CDS) is a contract which transfers financial risk from one party to another. In a credit default swap, the buyer pays the seller premiums over the lifetime of the contract, in exchange for the seller's assumption of risk. If the credit instrument involved in the credit default swap defaults, is radically devalued, or undergoes another catastrophic financial event, the seller pays the buyer the face value of the credit instrument."
Assets pledged as security for a loan. In the event that a borrower defaults on the terms of a loan, the collateral may be sold, with the proceeds used to satisfy any remaining obligations. High-quality collateral reduces risk to the lender and results in a lower rate of interest on the loan.
"An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds."
Site: http://www.investopedia.com/terms/c/cdo.asp
2. Def. Credit Default Swaps
"A credit default swap (CDS) is a contract which transfers financial risk from one party to another. In a credit default swap, the buyer pays the seller premiums over the lifetime of the contract, in exchange for the seller's assumption of risk. If the credit instrument involved in the credit default swap defaults, is radically devalued, or undergoes another catastrophic financial event, the seller pays the buyer the face value of the credit instrument."
Site: http://www.wisegeek.com/what-is-a-credit-default-swap.htm
Assets pledged as security for a loan. In the event that a borrower defaults on the terms of a loan, the collateral may be sold, with the proceeds used to satisfy any remaining obligations. High-quality collateral reduces risk to the lender and results in a lower rate of interest on the loan.