medium · Debt Capital Markets credit-ratings-risk
Which of the following describes 'Excess Spread' in the context of a securitization structure?
- The extra spread investors demand for holding a labeled ESG green bond instead of a conventional bond.
- The difference between the interest collected from the assets and the interest paid to the debt tranches and fees.
- The portion of the quoted credit spread that exceeds the market-implied risk-neutral probability of issuer default.
- The unscheduled principal repayment that occurs when a mortgage borrower refinances or prepays the underlying loan early.
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More Debt Capital Markets credit-ratings-risk practice
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