Question
A CMO is issued from a 200 mil. pool of mortgages. It has 4 tranches listed below. Figure out the the loss rate on the
A CMO is issued from a 200 mil. pool of mortgages. It has 4 tranches listed below. Figure out the the loss rate on the AAA tranche if 12 million in losses are incurred in the pool of mortgages. (Assume no principal repayments have occurred.)
AAA-rated Tranche $140 million
A-rated Tranche $ 40 million
B-rated Tranche $ 10 million
Unrated Tranche $ 10 million
What is the loss rate on the AAA-rated tranche in percentage points?
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The VAR Implementation Handbook
Authors: Greg Gregoriou
1st Edition
007161513X, 978-0071615136
