hard · Asset-Backed Securities
In a credit card master trust, the 'Discount Option' is exercised by the seller.
How does this reclassification affect the trust's performance metrics?
- It decreases portfolio yield while increasing principal collections.
- It accelerates the charge-off rate by shortening the receivable life.
- It increases the seller's interest by inflating the pool's reported balance.
- It increases excess spread to avoid an early amortization trigger.
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