Question: 1. Given the ABS & ABS CDO shown below, what is the minimum loss on the portfolio of underlying assets when: a) Senior ABS tranche

1. Given the ABS & ABS CDO shown below, what is the minimum loss on the portfolio of underlying assets when:1. Given the ABS & ABS CDO shown below, what is the

a) Senior ABS tranche a 50% has loss of principal?

b) Equity ABS CDO tranche has a 100% loss of principal?

c) Mezzanine ABS CDO tranche has a 100% loss of principal?

d) Senior ABS CDO tranche has a 50% loss of principal?

e) Senior ABS CDO tranche has a 100% loss of principal?

f) Why is it likely that the AAA-rated tranche of this ABS CDO is more risky than the AAA-rated tranche of the ABS?

g) Why are the risks in ABS CDOs misjudged by the market? What did we learn about this in 2007?

Please provide step-by-step work to answer this problem, thank you. **

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