securitazation Flashcards

1
Q

hard bullet covered bond

A

payment must be on a specific date
issuer must sell loans to fulfill payment when default

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2
Q

soft bullet bond

A

payment can be changed when loan default

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3
Q

overcollaterazation

A

100 m loan value is 95 mln bond and 5 mln of equity of SPE.

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4
Q

excess spread

A

interest is higher than coupon (SPE)

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5
Q

subordination

A

bonds are in tranches. waterfall bonds. pricnipal is payed in the line of seniority

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6
Q

CDO

A

collaterized debt obligations

asset backed security which is backed by a pool of other asset backed security. the payment for investors can be made by p+i or selling bonds on premium

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7
Q

CLO

A

collaterized loan obligations - a part of CDO backed by loans or loand cdo

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8
Q

Cash flow CLO

A

most common - cash flows for investors from hold and wait stategy

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9
Q

market value CLO

A

returns are made by buying and selling stock

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10
Q

MBS prepayement risk

A

mortgage cfs are uncertain
1. contraction risk - interest rates drop people pay the whole mortgage from refinancing for a lower yield (like callable bonds)

  1. extension risk - rates go up, less prepayement higher maturity of mbs and higher duartion
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11
Q

LTV - loan to value

A

borrowed funds/property value
the lower the less credit risk

decreases over time

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12
Q

DTI -debt to income

A

the whole debt/monthly gross pre tax income

the lower the better

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13
Q

prime mortgages

A

high credit quality, low dti low ltv, first lien mortgage

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14
Q

subprime mortgages

A

lower credit quality, high dti or ltv, may be second lien

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15
Q

recourse

A

lender can make a claim for borrower in default when hoke value is not enough to fulfuill credit

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16
Q

non- recuorse

A

lender has a claim against the proerty only

17
Q
A