Auction Rate Securities
Auction rate securities are long-term instruments with rates reset through periodic auctions, creating liquidity risk when auctions fail.
Fixed-income terms for auction-rate securities, collateralized bond obligations, tranches, and Z-bond structures.
Collateralized and tranched bond structures divide asset-backed or pooled-credit cash flows into classes with different payment priority, maturity, coupon, and loss exposure.
Use this branch when one collateral pool produces securities with different risk profiles.
| Term | What it clarifies |
|---|---|
| Auction-Rate Securities (ARS) | Securities with rates reset through auction mechanisms. |
| CBO | Collateralized bond obligation abbreviation. |
| Collateralized Bond Obligation (CBO) | A structured vehicle backed by a bond portfolio. |
| Traunch | Alternate spelling of tranche in structured-finance context. |
| Z-Bond | A tranche that may defer interest or principal until earlier tranches are paid. |
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Auction rate securities are long-term instruments with rates reset through periodic auctions, creating liquidity risk when auctions fail.
A CBO is a collateralized bond obligation backed by a pool of bonds and divided into tranches with different credit risk and return profiles.
A collateralized bond obligation pools bonds and issues tranched securities, shifting credit risk and cash-flow priority among investors.
Traunch is an alternative spelling of tranche, a slice of structured finance risk with its own priority, maturity, or cash-flow claim.
A Z-bond is an accrual tranche in a mortgage or structured-credit deal that defers cash payments while interest adds to principal.