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Answer: EUR 1,056,000
## Analysis This question appears to be incomplete as it doesn't provide the necessary information to calculate the OC account balance: - **Missing Information**: - Total pool size - Individual loan amounts - Tranche structure (senior, mezzanine, equity amounts and rates) - Swap curve rate - Recovery rate - OC account rules (caps, etc.) However, based on the pattern from the previous question and typical securitization structures, the calculation would involve: 1. **Interest Income**: Total pool × (swap curve + 2.2%) 2. **Interest Payments**: Senior + Mezzanine tranche payments 3. **Excess Interest**: Difference between income and payments (subject to caps) 4. **Recoveries**: Defaulted amount × recovery rate 5. **OC Balance**: Previous balance + excess interest + recoveries 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
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