MBS, as their name implies, are made up of mortgages—home loans bought from the banks that issued them. In contrast, CDOs are much broader: They may contain corporate loans, auto loans, home equity loans, credit card receivables, royalties, leases, and, yes, mortgages.

A mortgage-backed security (MBS) is an ABS where the specific assets behind the security are mortgages. A collateralised debt obligation (CDO) is an ABS where the specific assets behind the security are bonds, often a pool of MBS.

A collateralized mortgage obligation, or CMO, is a type of MBS in which mortgages are bundled together and sold as one investment, ordered by maturity and level of risk. A mortgage-backed security, or an MBS, is a kind of asset-backed security that represents the amount of interest in a pool of mortgage loans.

CMBS are backed by commercial real estate properties such as office buildings, shopping centers, and hotels, while MBS are backed by residential properties. Commercial properties tend to have higher credit risks than residential properties due to their higher vacancy rates and lower occupancy levels.