senior-subordinate tranche credit

MarginofSafety

A1
A2
A3
B1(subordinate)
B2(Subordinate)

The book notes that the A1-A3 seperates out the prepayment Risk and the A v. B set-up seperates out the credit risk.
So if prepayments are made Does it apply to A3 first? or
B2 the B1 then A3 etc...

kickthatcfa

Well I'd say Prepaments are applied in this order, B2 -> B1 -> A3 -> A2 -> A1

What chapter is this from? the entire FI is a BLUR!