Collateralized Debt Obligations (CDOs) are complex financial instruments that consist of pooled assets, typically including mortgages, bonds, and loans. These assets are grouped together and then divided into different risk levels, or tranches, which are sold to investors. Investors in higher tranches receive lower risk and lower returns, while those in lower tranches take on more risk for potentially higher returns. CDOs gained notoriety during the 2008 financial crisis, where significant losses from subprime mortgages led to widespread default and the collapse of numerous financial institutions.