Friday, April 13, 2012

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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

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X

Security 1:Responsible for losses between 50% and100% of principal: Rating AAA

Security 2:Responsible for losses between 0% and 50% of principal: Rating BBB

Further Securitization

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Security 1:Responsible for losses between 50% and100% of principal: Rating AAA

Security 2:Responsible for losses between 20% and50% of principal: Rating AA

Security 3:Responsible for losses between 0% and20% of principal: Rating BBB

X