Bond Education | Glossary
AD/Short Stated Maturity
An Accretion Directed CMO tranche receives principal payments from the interest that accrues on an Accrual or Partial Accrual class CMO (a Z-Bond). Because the principal payments are guaranteed by the interest from the Accrual bond, an AD bond has no extension risk and its maturity can be accurately defined even down to zero prepayments. AD bonds are also known as VADMs (Very Accurately Defined Maturity).