Question: A cash flow for a pass-through typically is based on some prepayment benchmark Option. Describe the benchmark Option. What does a conditional prepayment rate of

A cash flow for a pass-through typically is based on some prepayment benchmark Option. Describe the benchmark Option. What does a conditional prepayment rate of 8% mean? What does 150 PSA mean? How does a CMO alter the cash flow from mortgages so as to shift the prepayment risk across various classes of bondholders?

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