Collateralized Mortgage Obligation (CMO)

A type of security that attempts to customize the amount of prepayment risk associated with investments in mortgage-backed securities. The CMO creates bonds collateralized by a pool of mortgages or agency Pass-Through Securities. Each bond (called a Tranche) has a different rate of interest, repayment schedule, and priority level for receiving principal payments.

Updated on: 24/04/2023