Financial Risk Manager Part 2
Get started today
Ultimate access to all questions.
Comments
Loading comments...
Ultimate access to all questions.
In the scenario where a bank aims to securitize car loans by creating a Special Purpose Vehicle (SPV), transferring the loans to the SPV through a "true sale" transaction, and having the SPV issue securities through a "revolving securitization structure," which of the following statements accurately reflects the typical characteristics of securitization transactions and the specific features often incorporated in revolving securitization structures?
A
The credit quality of the securitized car loan assets would be enhanced if the principal value of securities issued is higher than the principal value of the assets.
B
The SPV can allow the bank to access cheaper funding if the credit quality of the securitized car loan assets is higher than the credit quality of the bank's balance sheet.
C
Under a revolving structure, prepayment assumptions are not incorporated, which typically results in principal amounts paid to investors through a series of coupons over the lifetime of the security.
D
Under a revolving structure, the bank transfers the car loan assets to the SPV and the SPV can issue multiple securitizations, which are priced and traded based on weighted-average life of the structure.