medium · Asset-Backed Securities
In a sequential principal waterfall, what is the impact of higher-than-expected prepayments on the 'Class B' (subordinate) tranche?
- It begins to receive principal distributions immediately alongside Class A.
- Its Weighted Average Life (WAL) remains largely unchanged while Class A is outstanding.
- Its credit support increases as Class A amortizes.
- Its Weighted Average Life (WAL) shortens significantly.
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