Learning Module 18 Asset-Backed Security (ABS) Instrument and Market Features

Which redeeming feature of covered bonds postpones acceleration of payments until a later final maturity date, typically up to one year beyond the original date?

Which internal credit enhancement increases the collateral amount relative to the issued securities so losses can be absorbed before investors suffer principal loss?

During a credit card ABS's revolving period what typically happens to principal repayments from cardholders?

A CDO backed primarily by leveraged bank loans and actively managed with overcollateralization tests is commonly called what?

Which tranche typically absorbs initial losses in a securitization waterfall?

If a securitized pool has EUR1,200 million of collateral but issued EUR1,000 million of ABS, the ratio illustrating extra collateral is called what?

Which of the following is an external credit enhancement?

A mortgage pass-through security's coupon paid to investors equals the pooled mortgages weighted average coupon minus which type of fee?

Which tranche pays only interest from the pool and no principal and thus is especially sensitive to prepayment acceleration?

If mortgage prepayments accelerate because market rates fall, what risk is primarily realized by MBS investors?

Which legal structure is used to separate the collateral from the originator and isolate creditor claims in a securitization?

Which of the following best explains why some non-agency RMBS required credit enhancements prior to the global financial crisis?

A solar ABS backed by residential solar loans shows total collateral carrying value EUR144 million and ABS issuance value EUR54 million. The collateral multiple equals approximately:

Which of the following best describes a Planned Amortization Class (PAC) tranche?

Which metric equals property net operating income divided by annual debt service and is crucial for CMBS underwriting?

Which of the following increases when a mortgage loan's outstanding balance falls while property value rises?

A CLO manager fails an overcollateralization test. What structural consequence commonly occurs?

Which tranche in a sequential-pay CMO receives principal only after the prior tranche is fully repaid?

Which risk is most relevant to the investor in a principal-only (PO) tranche when interest rates fall?

Which of the following most reduces reinvestment risk for an investor in a securitization tranche?

Which structure is characterized by the issuer retaining the collateral on its balance sheet while ringfencing eligible loans into a cover pool?

Which feature is used in CMBS to permit prepayment only if the borrower acquires a government-securities portfolio replicating remaining cash flows?

Why do covered bonds generally yield less than otherwise similar ABS?

Which tranche would a pension fund with a long-term horizon likely choose in a sequential-pay CMO with tranches maturing in 5, 15, and 30 years seeking higher returns?

In a securitization waterfall example, total losses on collateral equal EUR70 million; junior tranche D is EUR25 million, tranche C EUR50 million, tranche B EUR100 million. Which tranche(s) are wiped out and which tranche shows partial loss?

Which statement is true about agency RMBS in the United States?

Which is a likely consequence if a CMBS loan reaches maturity and the borrower cannot refinance or sell the property to satisfy the balloon payment?

An investor purchasing a tranche that is rated AAA in a CLO is most likely to accept which of the following characteristics?

Which of the following is most likely to reduce an issuer's leverage after selling loans to an SPE?

Which of the following ABS features specifically helps investors when a securitized pool is first issued and the trust acquires additional qualifying assets post-closing?

Which of these statements about CMBS prepayment risk is correct?

An investor wants exposure only to principal prepayments from a mortgage pool. Which security should they choose?

Which aspect of securitization most directly helps banks expand origination beyond their balance sheets?

Which of the following statements about CLO collateral pools is true?

Which event would most likely trigger early amortization (rapid amortization) in a credit card ABS during the revolving period?

What is the primary credit risk investors face in a true-sale securitization (SPE issues ABS)?

Which of the following is a defining characteristic of a collateralized mortgage obligation (CMO)?

For a securitization with four tranches A (senior), B, C, D (junior), which of the following best describes how ratings are typically assigned to each tranche?

Which of the following best describes the legal protection investors obtain from an SPE structure?

If a CLO was created with USD700 million of debt promises and requires USD840 million of loan purchases, the overcollateralization ratio equals:

Which securitization investor benefit is best described as the ability to tailor interest rate exposure, credit exposure, and maturities to specific needs?

When a mortgage pass-through pool has both scheduled principal and unscheduled prepayments, which single statistic gives an estimate of when the MBS can be expected to be paid off on average?

Which of the following is NOT commonly a role of the servicer in an ABS transaction?

Which characteristic most distinguishes CMBS from RMBS in terms of loan pool composition?

Which of the following best captures why investors might prefer agency RMBS to non-agency RMBS?

Which term describes the difference between the coupon earned on collateral and the coupon paid on ABS securities that can be used to absorb shortfalls?

An RMBS pool's weighted average coupon (WAC) is 4.5% and servicing fees are 0.5%; what pass-through coupon does that imply ignoring other fees?

Which statement about CLO equity tranches is most accurate?

Which of the following securitization documents describes the transaction structure, priority of payments, and credit enhancements offered to investors?

Which of the following is the best summary of a covered bond's investor recourse?