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MacK, you say “A bond issued at a discount of its face value at maturity is not strictly a Zero Coupon Bond.” This disagrees with the way the term is used. A zero coupon bond is a bond that makes no periodic interest payments and is initially sold at a discount from the face value payable at maturity. Usually, the term is restricted to bonds with a maturity in excess of one year. A zero coupon bond could be issued directly by a corporation or government, or it could be created synthetically by an agency selling the maturity payoffs from one or more coupon bonds, and selling the coupon payments to other investors.
You define derivative as "a tradeable instrument derived or deriving its value from at least one other tradeable instrument (and maybe more.)" Even if that definition is technically correct, in common parlance, the definition is broader. For example, a future, forward, or option on the CPI would usually be called a derivative, even though the CPI is not a tradeable instrument.
Regardless of the exact definition of derivative, I agree with you that mortgage backed securities are not the best examples of derivatives. In fact, I said in my original posting “A securitized pool of mortgage loans may be a derivative, but more importantly it is a basket or portfolio security.”
