Goldman Sachs' GSAMP Trust was able to create AAA-rated securities by:
A)separating the mortgage portfolio into tranches and assigning the tranches to share risks of default equally.
B)not disclosing the risks clearly.
C)guaranteeing or protecting some tranches.
D)separating the mortgage portfolio into tranches and assigning the A-1, A-2, and A-3 tranches last in order, after the M-1 to M-7 and B-1 to B-3 tranches, to suffer losses if a default occurred.
E)All of the above

Question

Quizplus · Accepted Answer

Goldman Sachs' GSAMP Trust created AAA-rated securities by structuring the mortgage portfolio into tranches, where the A-1, A-2, and A-3 tranches were prioritized to absorb losses last, thus protecting them and allowing them to receive higher credit ratings.

Goldman Sachs' GSAMP Trust Was Able to Create AAA-Rated Securities