hard · Asset-Backed Securities collateral
A prime auto loan pool with a $1,000M original balance has a cumulative net loss (CNL) base case of 2.50%. A rating agency applies a 4.5x multiple for a AAA stress. Additionally, they apply a 15% amplification factor for front-loaded loss timing and an 8% amplification factor for prepayment extension risk.
What is the effective loss percentage used in the AAA cash flow model?
- 11.48%
- 13.84%
- 11.25%
- 13.97%
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