M18 – Asset-Backed Security (ABS) Instrument & Market Features: CFAI Practice Problems
Question 1
Subordination in a securitized structure is a form of credit enhancement that:
- A. Provides external insurance against losses from borrower defaults.
- B. Creates a waterfall structure where junior tranches absorb losses before senior tranches.
- C. Requires the originator to deposit additional cash reserves with the trustee.
Answer
B. Creates a waterfall structure where junior tranches absorb losses before senior tranches.
Subordination (also called credit tranching) is an internal credit enhancement. Losses are allocated first to the most junior (equity/subordinated) tranches, protecting the senior tranches. The senior tranches receive higher credit ratings as a result.
📖 Giải thích chi tiết
Subordination là cơ chế tăng cường tín dụng nội bộ (internal credit enhancement):
Tranche cấp cao (Senior): Được bảo vệ, nhận thanh toán trước, rating cao
Tranche trung gian (Mezzanine): Hấp thụ tổn thất sau subordinated
Tranche cấp thấp (Equity/Subordinated): Hấp thụ tổn thất đầu tiên, lợi nhuận cao nhất
A sai: Bảo hiểm bên ngoài là external credit enhancement (surety bond, letter of credit).
B đúng: Subordination tạo waterfall — junior tranche chịu tổn thất trước.
C sai: Cash reserve là một dạng internal enhancement khác (overcollateralization), không phải subordination.
Question 2
Covered bonds differ from asset-backed securities (ABS) primarily because covered bonds:
- A. Are backed by a segregated pool of assets that remains on the issuer’s balance sheet, providing dual recourse.
- B. Are always structured with multiple tranches to accommodate different investor risk preferences.
- C. Transfer the underlying assets to a bankruptcy-remote SPE, eliminating recourse to the issuer.
Answer
A. Are backed by a segregated pool of assets that remains on the issuer’s balance sheet, providing dual recourse.
Covered bonds offer dual recourse: investors have a claim on both the cover pool of assets and the issuing financial institution. The assets remain on the issuer’s balance sheet, unlike ABS where assets are transferred to an SPE.
📖 Giải thích chi tiết
So sánh Covered Bonds vs ABS:
Covered Bonds ABS Tài sản Ở trên bảng cân đối issuer Chuyển sang SPE Recourse Dual (tài sản + issuer) Chỉ có tài sản trong SPE Phá sản issuer Nhà đầu tư có claim lên issuer Bankruptcy remote (không ảnh hưởng)
- A đúng: Dual recourse là đặc điểm chính phân biệt covered bonds với ABS.
- B sai: Covered bonds thường không có nhiều tranches.
- C sai: Đây mô tả ABS (chuyển tài sản sang SPE), không phải covered bonds.
Question 3
An ABS backed by auto loans differs from an ABS backed by credit card receivables primarily in that auto loan ABS:
- A. Has a revolving period during which principal repayments are used to purchase new receivables.
- B. Is a fully amortizing structure with scheduled principal and interest payments throughout its life.
- C. Does not face any prepayment risk because auto loans have fixed payment schedules.
Answer
B. Is a fully amortizing structure with scheduled principal and interest payments throughout its life.
Auto loan ABS are amortizing structures — the underlying loans have fixed monthly payments of principal and interest. Credit card ABS have a revolving period (new receivables replace paid-off ones) followed by an amortization/accumulation period.
📖 Giải thích chi tiết
So sánh Auto Loan ABS vs Credit Card ABS:
Auto Loan ABS Credit Card ABS Cấu trúc Amortizing (trả dần) Revolving → Amortization Gốc Trả dần theo lịch Revolving period: mua receivables mới Prepayment Có (trả trước xe) Không đáng kể trong revolving period Maturity Ngắn hơn (3-5 năm) Có lockout period
- A sai: Revolving period là đặc điểm của credit card ABS, không phải auto loan ABS.
- B đúng: Auto loans amortize với gốc và lãi trả đều đặn.
- C sai: Auto loan ABS vẫn có prepayment risk (người vay trả trước).
Question 4
A collateralized debt obligation (CDO) differs from a traditional ABS primarily because a CDO:
- A. Is always backed by residential mortgages.
- B. Has an asset manager who actively manages the underlying portfolio of debt obligations.
- C. Does not use credit tranching to allocate risk among investors.
Answer
B. Has an asset manager who actively manages the underlying portfolio of debt obligations.
CDOs typically have a collateral manager (asset manager) who buys and sells assets in the underlying portfolio, subject to certain constraints. Traditional ABS pools are static — once created, the assets in the pool do not change (except for amortization and defaults).
📖 Giải thích chi tiết
CDO (Collateralized Debt Obligation) có đặc điểm:
- Quản lý chủ động: Asset manager mua/bán tài sản trong pool
- Tài sản đa dạng: Corporate bonds, loans, ABS, MBS, hoặc synthetic (CDS)
- Cấu trúc tranche: Senior, Mezzanine, Equity (giống ABS)
Phân loại CDO:
CLO: Collateralized Loan Obligation (backed by leveraged loans)
CBO: Collateralized Bond Obligation (backed by bonds)
Synthetic CDO: Backed by CDS, không phải tài sản thực
A sai: CDO được backed bởi nhiều loại debt, không chỉ mortgages.
B đúng: Active management là điểm khác biệt chính với traditional ABS.
C sai: CDO sử dụng credit tranching tương tự ABS.