Please discuss all questions and explain. Thank you!
How do optional call provisions in a securitization differ from that of a call provision in a standard corporate bond questions relate to auto loan-backed securities.
(a) What is the cash flow for an auto loan-backed security?
(b) Why are prepayments of minor importance for automobile loan-backed securities?
(c) How are prepayments on pools of auto loans measured?
Please discuss all questions and explain. Thank you!
How do optional call provisions in a securitization differ from that of a call provision in a standard corporate bond questions relate to auto loan-backed securities.
(a) What is the cash flow for an auto loan-backed security?
(b) Why are prepayments of minor importance for automobile loan-backed securities?
(c) How are prepayments on pools of auto loans measured?
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Related questions
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A corporation is considering a securitization and is considering two possible credit enhancement structures backed by a pool of automobile loans. Total principal value underlying the asset-backed security is $300 million
Principal Value for: | Structure I | Structure II |
Pool of automobile loans | $304 million | $301 million |
Senior Class | $250 million | $270 million |
Subordinated Class | $50 million | $30 million |
(a) which structure would receive a higher credit rating and why?
(b) what forms of credit enhancement are being used in both structures?