A Collateralized Mortgage Obligation (CMO) is a security backed by a pool of mortgage- related products. An important feature of CMOs is that the coupon interest and principal from the underlying mortgage-related products are re-distributed across various classes (or tranches) of bondholders according to their risk preference. For example, a CMO could be structured such that while all tranches receive interest payments, any payment toward the principal (including prepayments) may be directed to investors holding the senior tranche until they are fully paid before investors in the junior tranche receive principal payments. Thus, the cash flows and their associated risks typically vary across CMO tranches depending on how the tranches are structured.