medium · Asset-Backed Securities
During a AAA stress test, an agency assumes a 'purchase rate' of 0% for a revolving trade receivables pool.
What is the analytical purpose of this assumption?
- To simulate a scenario where the originator goes bankrupt and stops generating sales.
- To increase the overcollateralization percentage by preventing the issuance of new debt.
- To test how quickly the bonds are repaid during a 'liquidation' or 'wind-down' of the trust.
- To ensure that only the highest-quality customers remain in the pool.
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