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Bookmark or Share- Collateralized Mortgage Obligation (CMO) - InvestingAnswersCollateralized mortgage obligations offer investors an opportunity to profit from a diversified, and therefore risk-reduced, set of mortgage-backed securities. CMOs subdivisions into graduated classes of risk cater to the risk preferences of prospective investors. Moreover, similar to collateralized loan obligations (or CLOs), CMOs provide a ...
- Commercial Mortgage-Backed Security (CMBS) - InvestingAnswersUnlike residential mortgage-backed securities, however, a CMBS does not present pre-payment risk to the holder, since commercial mortgage loans are set at a fixed term. Similar to collateralized mortgage obligation mortgage obligations (CMO), the mortgages that back the securities are classified into tranches of risk. This allows investors to ...
- Embedded Option Definition & Example - InvestingAnswersDifferent from a stand-alone option, an embedded option is an option that is embedded into the stock, bond, etc., and there may be more than one embedded option in a security. Embedded options generally cannot be separated from the securities to which they are attached. Here are descriptions of the most common embedded options used by issuers:
- MBS -- Mortgage-Backed Securities -- Definition & ExampleFannie Mae, Freddie Mac, and Ginnie Mae purchase mortgages and issue and/or guarantee MBS as part of their efforts to support the MBS industry and make homeownership possible for more people. Mortgage-backed securities (MBS) are securities that represent an interest in a pool of mortgage loans.
- Pass-Through Security Definition & Example - InvestingAnswersMortgage-backed securities (MBS) are some of the most common pass-through securities. To get a feel for how the 'pass-through' in Pass-Through Securities works, let's take a closer look at MBS. Step 1: Pool Some Assets. Let's assume you want to buy a house, and so you get a mortgage from XYZ Bank.
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