Business and Personal Finance Dictionary

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• Z TRANCHE
  
  A Z tranche is a CMO tranche. With the exception of jump Z tranches, owners of the Z tranche receive no cash flow from underlying mortgage collateral until the other tranches are retired. During the period when other tranches are still outstanding, the owners of the Z tranche receive credit for periodic interest. Those credits increase the face value of the tranche but are not paid to the owners. The Z bond may be, but does not have to be, the last tranche in a CMO structure that is retired. Sometimes called an accretion bond or an accrual bond.
  
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