A CMO is a multiclass pass-through that helps investors choose the amount of prepayment risk they will face.

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A CMO (Collateralized Mortgage Obligation) is a type of mortgage-backed security that allows investors to choose different "tranches" or classes that represent different levels of prepayment risk. Each tranche has a different priority for receiving principal and interest payments from the underlying mortgages, which helps investors tailor their risk and return preferences. Therefore, a CMO is a multiclass pass-through structure designed to mitigate prepayment risk.

A CMO Is a Multiclass Pass-Through That Helps Investors Choose