Chapter 6: The Credit Crisis of 2007
6.14.
Suppose that the principal assigned to the senior, mezzanine, and equity tranches for the ABSs
and ABS CDO in Figure 6.4 is 70%, 20%, and 10% instead of 75%, 20% and 5%. How are the
results in Table 6.1 affected?
Losses to Losses to Mezz Losses to equity Losses to Mezz Losses to senior
6.15.
Investigate what happens as the width of the mezzanine tranche of the ABS in Figure 6.4 is
decreased, with the reduction in the mezzanine tranche principal being divided equally between
the equity and senior tranches. In particular, what is the effect on Table 6.1?
The ABS CDO tranches become similar to each other. Consider the situation where the tranche