Traveling 120 miles an hour on a road built for cars can be perilous enough, but when you're -- almost literally -- heading into the unknown, it's a variable you can probably do without.
With the majority of CDOs being backed by mortgages, the principal-only tranche has a known future cash flow, but at a variable rate of return, while the interest-only tranche has both an unknown cash flow and an unknown rate of return on that cash flow.