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Accrual bond:
See “Z Class”
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Adjustable-Rate Mortgage (ARM):
A mortgage loan with an interest rate and payments that change periodically over the life of the loan.
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Amortize:
To repay a debt through a series of periodic payments.
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Average life:
Mortgage-backed securities return principal to the investor over a period of time rather than on one specific maturity date. The return of principal is therefore referred to as the average life, which is the weighted average time to receipt of principal. In most cases, the average life, approximately 50% of the principal will have been returned.
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The terms and definitions contained in the CMO Basics Glossary were developed by Incapital LLC. These definitions may differ from securities industry-related definitions for common terms. The definitions contained herein should be utilized with respect to the terms used in the Incapital.com website.