medium · Asset-Backed Securities
A $1.0B auto ABS pool is modeled at 1.2% ABS speed and reaches Month 24. The pool balance is now $250M. The analyst needs to calculate the 'Single Monthly Mortality' (SMM).
Which observation correctly describes the SMM's behavior over time in this deal?
- The SMM is always exactly one-twelfth of the annualized CPR figure under the ABS convention definition
- The SMM declines steadily over time because more seasoned, older loans carry progressively less incentive to prepay
- The SMM remains constant at exactly 1.2% throughout the entire scheduled life of the securitized transaction
- The SMM rises as the pool ages because the fixed ABS dollar amount is a larger share of the shrinking balance
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?