medium · Asset-Backed Securities asset-nuances
In a Master Trust structure for credit cards, a series enters a 12-month 'controlled accumulation period'.
How does this specifically affect the WAL of the bond compared to a rapid amortization event?
- It shortens the WAL because the accumulation happens on a fixed, efficient monthly schedule.
- It has no effect on WAL, since principal is still collected at the usual rate.
- It makes the WAL undefined because interest keeps accruing on the outstanding balance each period.
- It extends the WAL by delaying principal return to a single bullet payment at the end.
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