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Economic Commentary

Derivative Mechanics: The CMO

The current interest in financial derivatives sometimes appears to be driven by the same tastes that support police and doctor dramas on television: many crashes and a lot of blood. Though undeniably exciting, such shows do not teach you how to drive safely or how to administer first aid. Likewise, a concentration on the blowups of financial derivatives slights the more basic information needed for policy decisions or corporate risk management.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Haubrich, Joseph G. 1995. “Derivative Mechanics: The CMO.” Federal Reserve Bank of Cleveland, Economic Commentary 9/1/1995.