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Explanation:
A waterfall structure in a securitization refers to the rules or guidelines that dictate how cash flows from the collateral are distributed to the various securities in the capital structure. In a typical securitization transaction, the cash flows generated by the underlying assets are distributed according to this waterfall structure.
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Q.2886 What best describes a waterfall structure in a securitization?
A
The excess spread when there is no default
B
A financial intermediary that aggregates underlying loans and designs securitization structure
C
Rules on how cash flows from the collateral are distributed to the various securities in the capital structure
D
The process of creating a securitized credit product