Question about CMO Tranch Type

[Yan He]

Hello,

I've tried to find some more detailed information about CMO tranche structures.

Can anyone recommend any paper or book that have introduction to the tranche structure of CMO: say,
(1) what makes a companion tranch in CMO? Can I say a SUSS Companion tranch, because it surbodinate to the Senior one?
(2) what is WAR defined under CMO tranches ?


:sos::sos:

Thanks a lot.

 

[RussianMike]

CMP/SUP tranches are usually ones highly effected by prepayments. There's no seniority/sub as best I can tell.

What do you mean by WAR?

I have some Fabozzi books you can borrow.

 

[Yan He]

Thank you Mike!

"CMP/SUP tranches are usually ones highly effected by prepayments. There's no seniority/sub as best I can tell."

--- So, in other words, can I think of CMP/SSUP as kind of independent tranch that used to absorb prepayment risk.

WAR --- should be tranche type, but somehow I couldn't figure out. Bloomberg doesn't have the description for WAR neither..

 

[RussianMike]

I think thats correct but I havent looked at these in a a long time. WAR, are you looking at agencies?

 

[Yan He]

WAR, are you looking at agencies?

Yes, Mike, Agencies, JPMorgan as collateral.....

:wall

 

[Uncle Max]

Usually CMOs are backed by government securities (I believe this is the main difference between CMO and MBS). Therefore they have a very low risk and as a result a very low return.

Because risk is very low, tranching affects only average life of the bonds. If you want to put it in terms of prepayments - senior tranches have higher reinvestment risk if prepayments are high.