Question #33
Reading: Reading 28 Credit Analysis Models
PDF File: Reading 28 Credit Analysis Models.pdf
Page: 13
Status: Correct
Correct Answer: A
Question
An ABS security backed by a highly granular collateral pool composed of hundreds of clearly defined loans, analysis of collateral pool can be done using:
Answer Choices:
A. summary statistics for analyzing credit risk
B. examination of individual loans
C. distribution waterfall analysis
Explanation
A highly granular pool would have hundreds of clearly defined loans, allowing for use of
summary statistics as opposed to investigating each borrower. A more-discrete pool of few
loans would warrant examination of each obligation separately. Distribution waterfall
analysis is part of evaluation of the ABS structure (and not collateral pool).