Professional Documents
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Fixed 215
Fixed 215
Fixed 215
Asset-Backed
Securities
ABS = S MM
1 + S MM ´ ( M – 1)
where M is the number of months after origination
(i.e., loan age).
Ø Given the ABS, the SMM is obtained as follows:
ABS
SMM =
1 – ( A B S [ M – 1])
vStructure of a CDO
Ø The ability of the collateral manager to make the
interest payments to the tranches and pay off the
tranches as they mature depends on the
performance of the collateral.
Ø The proceeds to meet the obligations to the CDO
tranches (interest and principal repayment) can
come from coupon interest payments from the
collateral assets, from maturing of collateral assets,
and from sale of collateral assets.