Explanation:
The correct answer is B.
The default ratio for Credit Card Asset-Backed Securities (ABS) is calculated as the value of the credit card receivables that have been written off (deemed uncollectible) as a proportion of the value of total credit card receivables in the pool. This ratio indicates the actual credit losses experienced by the asset pool.
Option A is incorrect. This statement defines the delinquency ratio, which measures the proportion of accounts that are overdue but not yet written off.
Option C is incorrect. This defines the Monthly Payment Rate (MPR), which measures the proportion of the pool's principal and interest that is repaid by borrowers in a given period.
Option D is incorrect. The default ratio is measured relative to the total value of the credit card receivables (the assets), not the total liability.
Ultimate access to all questions.
Q.2052 There are various ratios which can be used for assessing the performance of Credit Card ABS. The three main types are the delinquency ratio, monthly payment rate (MPR), and default ratio. Which of the following statements correctly defines the default ratio?
A
The value of overdue credit card receivables (beyond ninety days) as a proportion of the total value of credit card receivables.
B
The value of written off credit card receivables as a proportion of the value of total credit card receivables.
C
The proportion of interest and principal on the pool that is repaid in a particular time period.
D
The value of written off credit card receivables as a proportion of the total liability.
No comments yet.