Which of the following best describes how accrual bonds distribute prepayment risk among tranches to create products that provide better asset and liability matching for institutional investors? Accrual bonds:
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A) |
have a fixed principal repayment schedule that must be satisfied as long as the support tranches exist. | |
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B) |
accrue the interest for one tranche and redistribute it to the other tranches. | |
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C) |
have several different tranches to which accrued interest is directed sequentially. | |
For many sequential-pay CMO structures, the last tranche to be paid principal also does not receive current interest until the other tranches have been paid off. This tranche is called the Z-tranche or accrual tranche, and the securities that represent a claim against its cash flows are called Z-bonds or accrual bonds. The interest that would ordinarily be paid to the accrual tranche is applied against the outstanding principal of the other tranches, in sequence. The diverted interest from the accrual tranche accrues. That is, it is added to the outstanding principal balance of the Z-tranche. | 
发表于 2011-3-23 14:29
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