Friday, April 13, 2012

Example Portfolio X has a principal of $100 million and a 2% chance of a loss over the next five years. It is rated BBB Security 1: Responsible for losses between 50% and 100% of principal: Rating AAA X Security 2: Responsible for losses between 0% and 50% of principal: Rating BBB

Further Securitization Security 1: Responsible for losses between 50% and 100% of principal: Rating AAA Security 2: Responsible for losses between 20% and 50% of principal: Rating AA X Security 3: Responsible for losses between 0% and 20% of principal: Rating BBB