Explanation:
This question appears to be incomplete as it doesn't provide the necessary information to calculate the OC account balance:
However, based on the pattern from the previous question and typical securitization structures, the calculation would involve:
Given that the OC account was EUR 0 at the end of year 1 and there were 8 defaults in year 2, the answer EUR 1,056,000 (option B) suggests this represents the recovery amount from 8 defaults.
Correct Answer: B (EUR 1,056,000) - This appears to be the recovery amount calculated from the 8 defaults.
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The loans in the collateral pool pay a fixed spread of 2.2% over the swap curve. There were no defaults in year 1. The value of the overcollateralization account at the end of year 1 was EUR 0. What is the value of the overcollateralization account at the end of year 2 if there are 8 defaults in year 2?
A
EUR 600,000
B
EUR 1,056,000
C
EUR 2,544,000
D
EUR 3,600,000