KIC000033 - Cash Flow Transactions (continued) )-...

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Unformatted text preview: Cash Flow Transactions (continued) )- Restrictions on Management: Quality Tests ,/ In rating a transaction, the rating agencies are concerned with the diversity ufthe assets.-/' Consequently, there are tests that relate to the diversity of the assets and these tests are called quality tests ,/ Quality tests consider: I . maturity restrictions ii. restrictions imposed on the concentration of bonds in certain countries or geographical regions for collateral consisting of emerging market bonds ,/ A dtversuy score is a measure that is constructed to gauge the diversity uflhe collateral's assets c The greater the score value, the lower the likelihood of default. ""~'''6''{;""".. ,~ " ~ ,< J o ,~ " ,..,,,, ;.-~"""",."".",,,,,,," Cash Flow Transactions (continued) ~ Restrictions on Management: Quality Tests ./ One can describe the distribution of the credit ratings of the collateral in terms of the percentage of the collateral's asset in each credit rating ./' However, there is a need to have one figure that summarizes the rating distribution test....
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KIC000033 - Cash Flow Transactions (continued) )-...

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