Reading 53: General Principles of Credit Analysis-LOS g 习题 General, security, agencies, important, 2011

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Session 14: Fixed Income: Valuation Concepts
Reading 53: General Principles of Credit Analysis

LOS g: Discuss the factors considered by rating agencies in rating asset-backed securities.

 

 

The most important issue for the credit analysis of an asset-backed security is:

A) quality of the seller/servicer.

B) quality of collateral.

C) legal structure.

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The analyst must determine the quality of the collateral. The collateral must generate the needed cash flow to service the debt.

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Which of the following statements regarding factors considered by rating agencies in rating asset-backed securities is least accurate?

A) The borrower's equity in an asset that has been offered as collateral is the primary determinant of whether the borrower will default or sell the asset to pay off the loan.

B) A firm's credit rating must be less than or equal to its overall corporate rating.

C) The servicer of the loan must be evaluated since the servicer is responsible for distributing proceeds to the bondholders, determining the interest rate for the period, and advancing payments when there are delinquencies.

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If a firm has structured securitized assets so that, in the event of bankruptcy, the courts will not apply the cash flow from the collateral toward the satisfaction of general corporate liabilities, then it is possible to obtain a credit rating higher than its overall corporate rating.

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Which of the following is NOT a primary factor considered by rating agencies in rating asset-backed securities?

A) Seller/service quality.

B) Cash flow stress.

C) Character of the underwriter.

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When rating asset-backed securities, the rating agency considers collateral credit quality, seller/service quality, cash flow stress, and payment structure and legal structure.

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Which of the following is NOT a primary factor considered by rating agencies in rating asset-backed securities?

A) Event risk.

B) Legal structure.

C) Credit quality of the collateral.

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When rating asset-backed securities, the rating agency considers collateral credit quality, seller/service quality, cash flow stress, and payment structure and legal structure.