medium · Asset-Backed Securities clos
If a CLO portfolio has a Weighted Average Spread (WAS) of 3.65% and the floor is 3.50%, a manager sells a loan with a spread of 3.20% and buys a loan with a spread of 3.40%.
How does this impact the WAS test?
- The WAS test fails outright because the newly purchased loan's 3.40% spread sits below the 3.50% floor requirement.
- The trade would be prohibited since neither loan's spread reaches the current 3.65% portfolio average level.
- The WAS test result declines slightly because 3.40% remains below the current portfolio average of 3.65%.
- The WAS test result improves because the new loan's spread is higher than the spread of the sold loan.
Sign up free to see the explanation and track your rank →
More Asset-Backed Securities clos practice
- A CLO manager is actively buying and selling senior secured… — Which phase of the transact
- If collateral par is USD 500 million and the relevant Class A debt is USD 310 million, wha
- If credit losses on the reference pool hit 5.0% and the investor's tranche detachment poin
- What is the current Overcollateralization (OC) ratio for the Class A notes?
- A CLO manager is in the reinvestment period. A 'CCC-rated' l… — Can the manager execute th
- If three loans totaling $15M default and are now valued at a 40% stressed recovery rate, w
- A 'CLO' portfolio currently has 12% of its assets rated 'CCC… — If the 'CCC' limit in the
- A CLO manager is managing a pool of leveraged loans. One of… — What is the standard mechan