Question
In securitized products, why must you distinguish contraction risk from extension risk?
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Answer
They are opposite prepayment risks affecting cash flow timing.
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Question
Why is the SPV's role central in a securitization structure?
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Answer
It isolates assets and issues securities backed by them.
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Question
How does credit tranching differ from time tranching in securitization?
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Answer
Credit tranching reallocates credit losses; time tranching reallocates prepayment timing.
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Question
Why is securitization still a high-priority exam topic even though many fixed-income questions are formula-based?
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Answer
It tests conceptual understanding of structure and risk transfer.
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