Question: 5. Given the ABS & ABS CDO shown below , what is the minimum loss on the portfolio of underlying assets when: a. Lower two

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

a. Lower two ABS tranches have a 100% loss of principal?

b. Senior ABS tranche a 50% has loss of principal?

c. Equity ABS CDO tranche has a 100% loss of principal?

d. Mezzanine ABS CDO tranche has a 100% loss of principal?

e. Senior ABS CDO tranche has a 50% loss of principal?

f. Senior ABS CDO tranche has a 100% loss of principal?

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

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

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