FINA 4110 Slides 8 [Securitization and the Credit Crisis of 2007]

FINA 4110 Slides 8 [Securitization and the Credit Crisis of 2007]

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Securitization and the Credit Crisis of 2007 Chapter 8 1
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Asset Backed Security (Simplified) 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 2
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The Waterfall Equity Tranche Senior Tranche Mezzanine Tranche Asset Cash Flows 3
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ABS CDOs or Mezz CDOs (Simplified) Assets Senior Tranche (80%) AAA Mezzanine Tranche (15%) BBB Equity Tranche (5%) Not Rated Senior Tranche (65%) AAA Mezzanine Tranche (25%) BBB Equity Tranche (10%) The mezzanine tranche is repackaged with other mezzanine tranches 4
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Losses to AAA Tranche of ABS CDO (Table 8.1, page 193) Losses on Subprime portfolios Losses on Mezzanine Tranche of ABS Losses on Equity Tranche of ABS CDO Losses on Mezzanine Tranche of ABS CDO Losses on Senior Tranche of ABS CDO 10% 33.3% 100% 93.3% 0% 13% 53.3% 100% 100% 28.2% 17% 80.0% 100% 100% 69.2% 20% 100% 100% 100% 100% 5
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U.S. Real Estate Prices, 1987 to 2009: S&P/Case-Shiller Composite-10 Index 6
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What happened… z
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This note was uploaded on 03/03/2012 for the course FINA 4110 taught by Professor Liu during the Spring '11 term at CUHK.

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FINA 4110 Slides 8 [Securitization and the Credit Crisis of 2007]

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