SeanWest

please see the numerical example in the text... also there is a problem in the EOC related to this...

see how the principal from Z_tranche moves to the Senior tranche. compare senior tranche in the two examples - one with a straight subordinate tranche, other with the z-tranche, and see how the principal payment window on the PAC tranche changes due to the presence of the z-tranche.

Senior tranche in the case where it is a straight subordinate tranche has different investment needs from the senior tranche where a z-tranche is present. Their timing and need for cashflows and their risk appetites are different.

CP