Credit risk transfer notes

A note covering the reference pool's losses between attachment and detachment, paid down with the pool's principal and written down by cumulative losses beyond the attachment, under constant or Vasicek defaults; price and discount margin, expected writedown and its probability, average life and yearly cash flows.

Inputs

Pool balance

Original pool

Pool WAC%

Remaining termmonths

Losses to date%

Attachment%

Detachment%

Spread over 1M%

Face held

Legal finalDefaults

Mean default rate a year%

Asset correlation

Paths

Recovery%

Prepayment (CPR)%

Price (0: at the spread)

CurrencyCurve

Curve: flat rate% cc

Results

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Methodology

Conventions

The note covers pool losses between attachment and detachment, as shares of the original pool.
It pays down pro rata with the pool's principal and is written down by cumulative losses beyond the attachment.
It pays the 1-month forward plus its spread monthly; discounted at a discount margin.

References

Freddie Mac STACR and Fannie Mae CAS offering documents

Formulas

Writedown: min(max(L − A, 0), D − A)