Question: An interest rate cap allows the buyer of the cap
An interest rate cap allows the buyer of the cap to be compensated if interest rates rise above a reference rate. The buyer has to pay a periodic premium to obtain this protection. When an RMBS transaction has a pool of floating-rate loans, what type of protections does an interest rate cap provide?
Answer to relevant QuestionsAnswer the below questions. a. What is an option ARM loan? b. Why is it unlikely that this loan type will be originated in the future? a. What is the conditional default rate? b. What is the cumulative default rate? Answer the below questions. a. Explain the cross-collateralization feature and its significance in a single-borrower / multiproperty CMBS transaction. b. Explain the cross-default feature and its significance in a ...What types of prepayment protection provisions result in a prepayment premium being paid if a borrower prepays? 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 ...
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