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Suppose that the principals assigned to the senior, mezzanine, and equity tranches are 70%, 20%, and 10% instead of 75%, 20% and 5% for both
Suppose that the principals assigned to the senior, mezzanine, and equity tranches are 70%, 20%, and 10% instead of 75%, 20% and 5% for both ABSs and ABS CDOs in Figure 6.4. How are the results in Table 6.1 affected?
Losses to subprime portfolio 10% 15% 20% 25% losses to Losses to Mezz equity tranche of tranche of ABS ABS CDO 25% 50% 75% Table 6.1 100% 100% 100% 100% 100% Losses to Mezz tranche of ABS CDO 100% 100% 100% 100% Losses to Senior tranche of ABD CDO 0% 33% 67% 100% Subprime mortgages ABSS Senior tranches (75%) AAA Mezzanine tranches (20%) BBB Equity tranches (5%) Not rated 6.4 ABS CDO Senior tranche (75%) AAA Mezzanine tranche (20%) BBB Equity tranche (5%) Losses to subprime portfolio 10% 15% 20% 25% losses to Losses to Mezz equity tranche of tranche of ABS ABS CDO 25% 50% 75% Table 6.1 100% 100% 100% 100% 100% Losses to Mezz tranche of ABS CDO 100% 100% 100% 100% Losses to Senior tranche of ABD CDO 0% 33% 67% 100% Subprime mortgages ABSS Senior tranches (75%) AAA Mezzanine tranches (20%) BBB Equity tranches (5%) Not rated 6.4 ABS CDO Senior tranche (75%) AAA Mezzanine tranche (20%) BBB Equity tranche (5%)Step by Step Solution
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