Active Tranche
Definition of 'Active Tranche'A tranche of a collateralized mortgage obligation (CMO) that is currently receiving principal payments that are passed through to its investors. While interest is paid on all tranches of a CMO when it is first issued, principal payments on each tranche are made according to a set schedule that is defined in the CMO prospectus. A tranche becomes the active tranche during the period when it is receiving (and paying out to investors) principal payments as per the schedule, in addition to interest. |
|
Investopedia explains 'Active Tranche'After an active tranche in a CMO receives the last principal payment, it is retired. The next tranche then becomes the active one. The process continues until all tranches in the CMO are retired. |
Related Definitions
Articles Of Interest
-
Profit From Mortgage Debt With MBS
Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing. -
These Financial Products Are Too Complex For The Average Joe
Structured financial products are so elaborate that investors are unable to assess costs and risk. -
Collateralized Debt Obligations: From Boon To Burden
CDOs were to be Wall Street's boon - instead they went bust. Find out what went wrong. -
Who bears the risk of bad debts in securitization?
Bad debts arise when borrowers default on their loans. This is one of the primary risks associated with securitized assets, such as mortgage-backed securities (MBS), as bad debts can stop these ... -
What is the difference between a collateralized mortgage obligation (CMO) and a collateralized bond obligation (CBO)?
Both collateralized mortgage obligations (CMOs) and collateralized bond obligations (CBOs) are similar in that investors receive payments from a pool of underlying assets. The difference between ... -
Weighted Average Cost Of Capital (WACC)
Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality -
How Interest Rates Affect The Housing Market
Understand how rate changes can affect home prices, and learn how you can keep up. -
Exploring The Current Account In The Balance Of Payments
Learn how a country's current account balance reflects the country's economic health. -
Break Into Forex In 12 Steps
Learn how to get started in forex trading. -
Taking Shots At CAPM
Find out why many investors think the capital asset pricing model is full of holes.
Free Annual Reports