标题: Accrual tranche (Z bond) cash flow [打印本页] 作者: torontoanalyst 时间: 2011-7-11 19:14 标题: Accrual tranche (Z bond) cash flow
Hi all,
Let's suppose a CMO with 2 tranches, A and Z during the first two months
During the month 1, the interest of Z tranche is added to the principal of 2 --> ok
During the month 2, the same "saved" interest is used to increase the outstanding principal of Z tranche --> ok
Taken separately (and exclusively), i understand the logic ( \o/ ) but the fact is that the "saved" interest is really added TWICE...that's where i'm confused and don't understand how this could be possible
Thanks by advance for your help 作者: 5566 时间: 2011-7-11 19:14
Stupid question.
The amount to increase the month 2 principal of the accrual tranche is taken from the beginning principal of the normal tranche (A).作者: economicz 时间: 2011-7-11 19:14
If I understand your question, there is a diversion of cash flow from Tranche Z to Tranche A, i.e. Tranche A gets the money and Tranche Z doesn't. Hence there is no double counting
