Bond Education | Glossary
Accretion-Directed (AD)
A CMO class, deriving its cash flows form the interest accrual of a Z-Tranche. Because they derive their cash flows from the interest accrual of a Z-Tranche, Accretion Directed CMOs have little extension risk even in very low prepayment speed scenarios, and Accretion-Directed CMOs are also sometimes referred to as Very Accurately Defined Maturity (VADM) classes.