FIN4520-Chapter8

FIN4520-Chapter8 - Asset 1 Asset 2 Asset 3 Asset n...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Securitization and the Credit Crisis of 2007 Chapter 8 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Definitions Collateralized Debt Obligation (CDO) An ABS where the underlying asset is a portfolio of bonds Asset-Backed Security (ABS) A security created from a portfolio of loans, bonds, credit card receivables, …. The cash flows are allocated to tranches based on risk attributes Special Purpose Vehicle (SPV) A legal entity created to fulfill narrow or temporary objectives 2
Background image of page 2
Asset Backed Security (Simplified)
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Asset 1 Asset 2 Asset 3 Asset n Principal: $100 million SPV Senior Tranche Principal: $80 million Return = LIBOR + 60bp Mezzanine Tranche Principal:$15 million Return = LIBOR+ 250bp Equity Tranche Principal: $5 million Return =LIBOR+2,000bp 3 The Waterfall Equity Tranche Senior Tranche Mezzanine Tranche Asset Cash Flows 4 ABS of ABS Senior tranches were easy to place but mezz not so easy. This lead to ABS of ABS or Mezz ABS CDO. 5...
View Full Document

Page1 / 5

FIN4520-Chapter8 - Asset 1 Asset 2 Asset 3 Asset n...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online