Assets Liabilities and equity Cash $10 Demand deposits $90 Quick Money Aaa tranche $15 Equity $10 Quick Money Ba1 tranch
Posted: Tue Jan 18, 2022 1:01 pm
Assets
Liabilities and equity
Cash
$10
Demand deposits
$90
Quick Money Aaa tranche
$15
Equity
$10
Quick Money Ba1 tranche
$5
Loans (risk weight 100%)
$70
. If 15 percent of Subprime Quick Money loan pool is written off, the value of BIG Bank AAA tranche holding will be $ and its Ba1 tranche holding will be valued at $ Big Bank's Equity will change to $ . Is this still 10% of its RWA?
c. If Big Bank would have invested $20 directly into MBS(the same type of loans as Quick Money) and 15% of the underlying loans would have defaulted, the loss for Big Bank would have been exactly $ This would have been (better / worse) than the investment in the tranches. d. Continue with your balance sheet from b) after the losses. If Big Bank would swap all its loans against Quick Money A3 tranches, its RWA would change to $ (no rounding!). Check if Big Bank is now achieving its minimum CAR of 10% again.
Liabilities and equity
Cash
$10
Demand deposits
$90
Quick Money Aaa tranche
$15
Equity
$10
Quick Money Ba1 tranche
$5
Loans (risk weight 100%)
$70
- Assets Liabilities And Equity Cash 10 Demand Deposits 90 Quick Money Aaa Tranche 15 Equity 10 Quick Money Ba1 Tranch 1 (14.91 KiB) Viewed 40 times
- Assets Liabilities And Equity Cash 10 Demand Deposits 90 Quick Money Aaa Tranche 15 Equity 10 Quick Money Ba1 Tranch 2 (31.5 KiB) Viewed 40 times
c. If Big Bank would have invested $20 directly into MBS(the same type of loans as Quick Money) and 15% of the underlying loans would have defaulted, the loss for Big Bank would have been exactly $ This would have been (better / worse) than the investment in the tranches. d. Continue with your balance sheet from b) after the losses. If Big Bank would swap all its loans against Quick Money A3 tranches, its RWA would change to $ (no rounding!). Check if Big Bank is now achieving its minimum CAR of 10% again.