CHAPTER 3
Structuring Agency MBS Deals
In this chapter we illustrate the structuring of agency deals backed by residential mortgage-backed securities. The resulting structures are referred to as collateralized mortgage obligations (CMOs).12 Before illustrating structuring, we must briefly review the concept of prepayments, its measurement, and the convention that has developed in the marketplace for quoting the rate of prepayments (i.e., prepayment speeds).
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