Exercise: Losses to Tranches of

ABS and ABS CDO

$$ Assume $4$ tranches at the first level of

securitization: AAA $(78\%),$ A $(10\%),$ BBB $(10\%),$

and NR $(2\%)$

$$ What are the losses to tranches of ABS?

$$ Assume $3$ tranches are created at the second

level of securitization$,$ based on the BBB

Mezzanine tranche of the first level: AAA $(75\%),$

BBB $(20\%),$ and NR $(5\%)$

$$ What are the losses to tranches of ABS CDO?

$1/16/2014$ FIN$43213$