You are given $100 million and an assignment to design ABS and ABS CDO that fit the following criteria: A default of 5% in the collateral mortgages will wipe out 50% of the ABS equity tranche, and additional 6.25% default will wipe out 50% of the ABS CDO equity tranche, an additional $5,000,000 default will wipe out 50% of the ABS CDO mezzanine. ABS CDO senior tranche is twice the size of the ABS CDO mezzanine. 

Draw a chart of ABS and ABS CDO tranches and allocate appropriate $ amounts.

Answer rating: 100% (QA)

To design the ABS AssetBacked Securities and ABS CDO Collateralized Debt Obligation tranches with the specified criteria we need to allocate the 100 m... View the full answer