Supports the main tranche in certain collateralized mortgage obligations (CMOs). The main tranche takes priority for principal and interest payments, while the companion tranche assumes the risk of variable prepayment rates. The companion tranche stabilizes the main tranche, and in return offers the potential of a higher yield. Also called support tranche.
Related information about companion tranche:
- Companion Tranche Definition | Investopedia
A class of tranche found in planned amortization class (PAC) and targeted amortization class (TAC) collateralized mortgage obligations (CMOs) that absorbs ...
- The Various Types of CMOs
In other words, at least two bond tranches are active at the same time, a PAC and a companion tranche. When prepayments are minimal, the PAC payments are ...
- What is companion tranche? definition and meaning
Definition of companion tranche: Supports the main tranche in certain ... The companion tranche stabilizes the main tranche, and in return offers the potential of a ...
- Collateralized Mortgage Obligations (CMOs)
All CMOs that have PAC or TAC tranches will have a companion tranche to absorb variable prepayment rates. Because companion tranches receives the most ...
- CMO Glossary From David Lerner Associates
Companion tranche: A CMO tranche .... The effect of the prepayment variability that is removed a PAC bond is transferred to a companion tranche. Par: A price ...
- Collateralized Mortgage Obligations (CMos) - George K. Baum ...
at the same time, a PAC and a companion tranche. ... ments to the active companion tranche. The aver- age life of a companion tranche may vary widely, ...
- Collateralized Mortgage Obligations
Planned Amortization Class - PAC tranches use a companion tranche (discussed later) to combat prepayments that occur faster or slower than anticipated.
- dwight
or shortfall of payments into the companion tranche. The average life of a Companion tranche may vary signifi- cantly, depending on the prepayment rate of the ...