Support tranches are most appropriate for investors who are
A、concerned about their exposure to extension risk
B、concerned about their exposure to concentration risk
C、willing to accept prepayment risk in exchange for higher returns
D、空
A、concerned about their exposure to extension risk
B、concerned about their exposure to concentration risk
C、willing to accept prepayment risk in exchange for higher returns
D、空
Section B – TWO questions ONLY to be attempted
The finance division of GoSlo Motor Corporation has made a number of loans to customers with a current pool value of $200 million. The loans have an average term to maturity of four years. The loans generate a steady income to the business of 10·5% per annum. The company will use 95% of the loan’s pool as collateral for a collateralised loan obligation structured as follows:
– 80% of the collateral value to support a tranche of A-rated floating rate loan notes offering investors LIBOR plus 140 basis points.
– 10% of the collateral value to support a tranche of B-rated fixed rate loan notes offering investors 11%.
– 10% of the collateral value to support a tranche as subordinated certificates (unrated).
In order to minimise interest rate risk, the company has decided to enter into a fixed for variable rate swap on the A-rated floating rate notes exchanging LIBOR for 8·5%.
Service charges of $240,000 per annum will be charged for administering the income receivable from the loans.
You may ignore prepayment risk.
Required:
(a) Calculate the expected returns of the investments in each of the three tranches described above. Estimate the sensitivity of the subordinated certificates to a reduction of 1% in the returns generated by the pool. (10 marks)
(b) Explain the purpose and the methods of credit enhancement that can be employed on a securitisation such as this scheme. (4 marks)
(c) Discuss the risks inherent to the investors in a scheme such as this. (6 marks)
A、Je voudrais quatre tranches de jambon.
B、Êtes-vous chinoise ?
C、Une baguette, s'il vous plaît.
D、Vous parlez français ?
E、Excusez-moi, vous avez l'heure ?
F、Je voudrais devenir enseignant.
The support on the right side is a ______.
A、link support
B、fixed support
C、hinge support
D、fixed direction support
Suppose the support of random variableis, and the support of random variableis. If. Thenandare independent.
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