# Primer on CDOs **What are CDOs?** Working in similar fashion to its counterpart traditional finance, created CDOs are derivative products that are backed by an underlying cash flow generating asset, such as tokens that are sent to a lending pool to farm yield. \ \ Users that subscribe to a CDO are then classified to different risk and reward profiles, to provide efficiently created inherent risk adjustment and financial leverage benefits between investors without requiring additional remedial action (such as taking on 3rd party insurance for risk or paying high interest for leverage). ![Fluid choice of risk/reward options allow users to get the yield returns and risk exposure they want.](https://3240608428-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MV_qRrVDr03qY_iXZz3%2F-MW31trREsRVVBdVKWZD%2F-MW35VE-iRnPRk4jj44W%2FCdo%20graphic.png?alt=media\&token=5642ec60-e588-45a1-89c7-e9dd1221b902) At the end of every CDO contract, yield and investment principals are paid out in a waterfall fashion, with senior tranche participants (lowest risk, lowered yield) having priority yield and principal repayment and junior tranche participants (higher risk, leveraged yield) having secondary yield and principal repayment. This creates effective protection for the senior tranche participants of the CDO contract by lower tranche participants, as their principal and expected returns are protected by subsequent tranches. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://cdo-finance.gitbook.io/cdo-finance/cdo-protocol/primer-on-cdos.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.