hard · Asset-Backed Securities collateral
An analyst is evaluating an auto loan ABS pool with a base case cumulative net loss (L_base) of 2.5%. The rating agency applies a AAA multiple of 4.5×, a loss timing stress factor of 1.15×, and a prepayment extension stress of 1.08×.
If the transaction generates 3.0% in total excess spread over its 2.5-year weighted average life, what is the required hard credit enhancement (CE) to achieve a AAA rating?
- 11.25%
- 13.97%
- 8.25%
- 10.97%
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