This briefly illustrates a fully-funded balance sheet CDO. For FRM candidates, the key idea is the difference between the cash and synthetic CDO: while both transfer credit risk (away from originator toward investors)...

• In a cash CDO, the reference portfolio is "reinsured" by a true sale of the assets. They are sold off the balance sheet
• In a synthetic CDO, the originator reinsures by purchasing credit protection (CDS)

The investors have a similar experience. But their cash (which purchases tranched securities), instead of funding the originator, is deposited with the trustee. Here is the screencast:

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