A collateralized mortgage obligation (CMO) that pays an adjustable rate of interest that is tied to a reference interest rate. In other words, the coupon resets periodically (typically monthly or quarterly) at a rate equal to that of an index (usually one-month or three-month LIBOR) plus a spread (the reset margin) subject to a lifetime or interim interest rate cap and floor. The coupon resets in the direction of the underlying index.
August 27, 2024
