- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 45. Introduction to Asset-Backed Securities
- Subject 2. The Securitization Process
CFA Practice Question
When an ABS ((asset-backed security) is structured to distribute prepayment risk, it is called ______.
II. credit tranching
III. time tranching
I. prepayment tranching
II. credit tranching
III. time tranching
A. I only
B. I and III
C. II only
Explanation: Prepayment risk is uncertainty about the cash flow among different bond classes.
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