Collateralized mortgage obligations (CMOs) are generally perceived to have

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Collateralized mortgage obligations (CMOs) have a high degree of interest rate risk as they are highly sensitive to changes in interest rates. When interest rates rise, the cash flow to CMO investors decreases, and when interest rates fall, the cash flow increases. This makes CMOs highly volatile and risky. However, they may have relatively lower default risk as they are typically backed by collateral in the form of a pool of mortgages.

Collateralized Mortgage Obligations (CMOs) Are Generally Perceived to Have