COMPANION BONDS


Meaning of COMPANION BONDS in English

A class of a Collateralized Mortgage Obligation (CMO) whose principal is paid off first when the underlying mortgages are prepaid due to falling interest rates . When interest rates rise, there will be lower prepayment of the principal ; therefore, companion bonds therefore contain most of the prepayment risk of a Collateralized Mortgage Obligation (CMO) .

Campbell R. Harvey. Hypertextual finance English glossary.      Английский словарь гипертекстовых финансов.