The creation of bond classes with a waterfall structure for sharing losses is referred to as:
A) time tranching.
B) credit tranching.
C) overcollateralization.

Question

Quizplus · Accepted Answer

The creation of bond classes with a waterfall structure for sharing losses is referred to as credit tranching. Time tranching refers to the allocation of coupon payments to different classes of bonds based on time, and overcollateralization involves providing additional collateral to enhance the credit quality of the bonds.

The Creation of Bond Classes with a Waterfall Structure for Sharing