medium · Asset-Backed Securities
A credit card master trust experiences three consecutive months where the portfolio yield is 18%, charge-offs are 10%, and the base rate (bond coupons + servicing) is 7.5%.
If the early amortization trigger is 'three-month average excess spread < 0%', what happens to the trust?
- The seller is required to add more receivables to the pool.
- The trust enters rapid amortization, and principal is returned sequentially to bondholders.
- The revolving period continues as the excess spread is still positive.
- The trust immediately draws on the Reserve Account to pay the seller.
Sign up free to see the explanation and track your rank →
More Asset-Backed Securities practice
- Which vehicle was specifically created by the Tax Reform Act of 1986 for this asset class?
- What is the most likely tax structure?
- Given the real estate collateral, which tax vehicle is standard for this multi-class trans
- In a two-step auto-loan securitization, the originator first… — What is the principal lega
- Under ASC 860, which condition must be met for a transfer of receivables from an originato
- Why does it covenant NOT to incur additional debt?
- A CLO manager is actively buying and selling senior secured… — Which phase of the transact
- Which explanation best identifies the additional spread components in the non-agency bond?