passthrough vs. paythrough difference, between, respect

morebeans

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

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.

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.

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.