Final answer:
CMO stands for Collateralized Mortgage Obligations. These are types of mortgage-backed securities that are created by pooling together a group of mortgages and dividing them into different tranches or classes.
Step-by-step explanation:
CMO stands for Collateralized Mortgage Obligations.
These are types of mortgage-backed securities that are created by pooling together a group of mortgages and dividing them into different tranches or classes.
Each tranche has a different level of risk, return, and volatility. CMOs help investors determine the risk/return/volatility of different tranches by analyzing the characteristics of the underlying mortgages such as interest rates, prepayment risks, and credit quality.