passthrough vs. paythrough difference, between, respect

morebeans

What is the difference between passthrough vs. paythrough tranching with respect to ABS?

genuinecfa

Not really sure what you're talking about with 'Paythrough', but my understanding was that there are two types of MBS'.

1) Passthrough: Where all the payments are passed through as they are to the investors. So every investor has the same prepayment risk. i.e there is no 'tranching'

2) Traching : Different Tranches have different risks...PAC's, Sequential, IO's, PO's etc..



Edited 1 time(s). Last edit at Friday, June 3, 2011 at 11:31AM by deepstack31.

scarecrow

from my notes:

Passthrough vs Paythrough Structure
ABSs can have passthrough or paythrough structures.

Passthrough: cash flows generated by the underlying asset pool are paid, pro rata, to the investors
Paythrough: the CFs are distributed according to what tranche an investor went with. The same asset pool can allow securities with varying risks to be created from it.

so I understand this to mean that paythrough is just a passthrough that gets tranched up.

scarecrow

i dunno, that's just what's there, so I trust it



Edited 1 time(s). Last edit at Friday, June 3, 2011 at 01:37PM by magicskyfairy.