1. Friday, April 13, 2012

13. 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

14. 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