contain short sequentials, Z-bonds, and credit subordination. A NAS tranche receives principal payments according to a schedule which shows for a given month the share of pro rata principal that must be distributed to the NAS tranche. NASquential NASquentials were introduced in mid-2005 and represented an innovative structural twist, combining the standard NAS (Non-Accelerated Senior) and Sequential structures. Similar to a sequential structure, the NASquentials are tranched sequentially, however, each tranche has a NAS-like hard lockout date associated with it. Unlike with a NAS, no shifting interest mechanism is employed after the initial lockout date. The resulting bonds offer superior stability versus regular sequentials, and yield pickup versus PACs. The support-like cashflows falling out on the other side of NASquentials are sometimes referred to as RUSquentials (Relatively Unstable Sequentials). Coupon tranching The coupon stream from the mortgage collateral can also be restructured (analogous to the way the principal stream is structured). This coupon stream allocation is performed after prepayment tranching is complete. If the coupon tranching is done on the collateral without any prepayment tranching, then the resulting tranches are called 'strips'. The benefit is that the resulting CMO tranches can be targeted to very different sets of investors. In general, coupon tranching will produce a pair (or set) of complementary CMO tranches. IO/discount fixed rate pair A fixed rate CMO tranche can be further restructured into an Interest Only (IO) tranche and a discount coupon fixed rate tranche. An IO pays a coupon only based on a notional principal, it receives no principal payments from amortization or prepayments. Notional principal does not have any cash flows but shadows the principal changes of the original tranche, and it is this principal off which the coupon is calculated. For example, a $100mm PAC tranche off 6% collateral with a 6% coupon ('6 off 6' or '6-squared') can be cut into a $100mm PAC tranche with a 5% coupon (and hence a lower dollar price) called a '5 off 6', and a PAC IO tranche with a notional principal of $16.666667mm and paying a 6% coupon. Note the resulting notional principle of the IO is less than the original principal. Using the example, the IO is created by taking 1% of coupon off the 6% original coupon gives an IO of 1% coupon off $100mm notional principal, but this is by convention 'normalized' to a 6% coupon (as the collateral was originally