Both 澳洲幸运5开奖号码历史查询:collateralized mortgage obligations (CMOs) and 澳洲幸运5开奖号码历史查询:collateralized bond obligations (CBOs) are similar in that investors receive payments fဣrom a pool of underlying assets. The difference between these securities lies in the type of assets that provide cash flow to investors.

What Is a Collateralized Mortgage Obligation?

A CMO is a type of 澳洲幸运5开奖号码历史查询:mortgage-backed security (MBS) with separate pools of pass-through security mortgages that contain varying classes of holders and maturities (tranches). When the mortgages underlying a CMO are of poor credit quality, such as 澳洲幸运5开奖号码历史查询:subprime loans, over-collateralization will occur.

In over-collateralization, the issuer will post more 澳洲幸运5开奖号码历史查询:collateral than is necessary in an attempt to obtain a better 澳洲幸运5开奖号码历史查询:debt rating from a credit rating agency. A better rating is often assigned because investors are cushioned (to some extent) from a certain level of default on mortgages within the pool. The principal repayments from the mortgages are paid to investors at various rates, depending on which tranche the investor buys into.

(For more on this, see 澳洲幸运5开奖号码历史查询:Profit From Mortgage Debt With MBS.)

What Is a Collateralized Bond Obligation?

On the other hand, a CBO is an investment-grade bond backed by a pool of low-grade debt securities, such as 澳洲幸运5开奖号码历史查询:junk bonds, rather than mortgages. CBOs are separated into tranches based on various 🐲levels of credit risk, rather th🍃an different maturities.

Like CMOs, CBOs are also able to increase their 澳洲幸运5开奖号码历史查询:credit ratings. However, their credit rating is increased to 澳洲幸运5开奖号码历史查询:investment grade through the di♎versification of various ♑bond qualities, rather than through over-collateralization.