It stands for collateralized debt obligation trust preferred security; a collateralized debt obligation (CDO) that is issued on a pool of trust preferred securities (TruPS). A trust is formed to acquire and hold TruPS, and then issue new securities. TruPS issued by small and mid-sized banks can be pooled and used as collateral for the new securities. These CDO-TruPS can give small financial institutions an access to capital markets on better terms than in a direct way.

The investors or holders of a CDO-TruPS are indirectly exposed to the market for the assets (underlying debt securities) held by the trust. TruP CDOs (TruPS CDOs) are typically structured into senior, mezzanine, and income classes, and then sold to investors. The most common features in these structures include performance triggers (overcollateralization tests and interest coverage tests).