Explain how a cash CDO and a synthetic CDO are created.

1. Explain the two ways a credit default swap can be settled.
2. Explain how a cash CDO and a synthetic CDO are created.
3.Explain what a first-to-default credit default swap is. Does its value increase or decrease as the default correlation between the companies in the basket increases? Explain.
4. Explain the difference between risk-neutral and real-world default probabilities.
5. Explain why a total return swap can be useful as a financing tool.