easy · Asset-Backed Securities tranching
A rating agency is sizing the credit enhancement for a prime auto loan pool with a base case expected lifetime loss of 2.5%. To achieve a AAA rating, they apply a 4.5x multiple.
If they also assume a 15% increase in total losses due to front-loaded timing stress, what is the final required Credit Support?
- 12.94%
- 18.50%
- 11.25%
- 2.88%
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