The prepayment wave that has wreaked havoc in the mortgage securities market for the last year has also given rise to an innovative collateralized mortgage obligation specifically designed to relieve investors of prepayment risk: the cash flow security.

By repackaging the most risky or prepayment sensitive securities, such as interest-only strips, with the less risky components of CMOs, a number of Wall Street firms are creating new derivative securities that in many cases closely resemble pass -- through mortgage securities for investors.

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