Collateralized Mortgage Obligation - Is a securitisation payment method where the cash inflows of the SPV are divided into several tranches, each tranche having different payback period and seniority profile. These tranches, which are often designated as A to Z pieces or securities, normally in the form of bonds. For example, the A bonds might be the senior most in terms of security, and might off faster than other bonds. The different tranches can be structured as per the objectives of the investors as to pay back period and the risk inherent. The common CMO structures are: Interest Only, Principal Only, Floater, Inverse Floater, Planned Amortization Class, Support, Scheduled, Sequential, Targeted Amortization Class, and Z or Accrual Bond. Often, many of these securities contain option characteristics. Related structures are Collateralized Bond Obligations and Collateralized Loan Obligations.

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