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Suppose that the structure for an asset-backed security transaction is as follows: senior tranche $220 million subordinate tranche 1 (Senior) $50 million subordinate tranche 2
- Suppose that the structure for an asset-backed security transaction is as follows:
senior tranche $220 million
subordinate tranche 1 (Senior) $50 million
subordinate tranche 2 (Junior) $30 million
and that the value of the collateral for the structure is $340 million.
- How much is the overcollateralization in this structure?
- What is the amount of the loss for each tranche if losses due to defaults over the life of the structure total $100 million? (Hint: Please consider the overcollateralization)
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