For information about CMO functions, see the CMO Workflow.
||Generate cash flows for sequential collateralized mortgage obligation (CMO)|
||Generate cash flows for scheduled collateralized mortgage obligation (CMO) using PAC or TAC model|
||Generate principal balance schedule for planned amortization class (PAC) or targeted amortization class (TAC) bond|
This example shows how to use an underlying MBS pool for a 30-year fixed-rate mortgage to define a PAC bond and then define a sequential CMO.
In contrast to an MBS, a CMO structures cash flows to different tranches to create securities that are better tailored to specific investors.
Prepayment risk is the risk that the term of the security varies according to differing rates of repayment of principal by borrowers.
Workflow for developing a CMO.