Priority and inferiority mean that the order of rights and interests distribution is different, and their risks and benefits are different. For example, the priority risk is low and the yield is low. The risk of inferior level is high and the rate of return may be high. If a product loses money, it will lose the inferior fund first, only all inferior funds lose money, and then the priority fund is damaged. If a product is profitable and the profit is very large, then when it is allocated to the lower rate of return agreed in the original agreement, all the remaining profits will be owned by the inferior level.
Credit enhancement is mainly divided into internal credit enhancement and external credit enhancement. Internal credit enhancement is carried out from the perspective of the structural design of the basic asset pool of asset-backed securities and the design of product credit enhancement mechanism, which mainly includes the structural arrangement of priority and secondary, spread payment system, excessive mortgage setting, margin and cash reserve account, etc. External credit enhancement is mainly based on external or financial credit guarantee, including guarantee, differential payment commitment, repurchase commitment and liquidity support.
Most of the priority investors in credit asset securitization are banks. Although the proportion of investment in public funds has increased, the proportion of funds is still far lower than that of bank funds. The priority interest rate of credit asset-backed securities is generally low. For some institutional investors or private equity products with high risk preference, securitization of subprime credit assets is more attractive than priority.
1. The lower the priority issue interest rate, the lower the cash flow expenditure cost, the more it can absorb the default loss of the overall assets, and the greater the income of the subordinated securities. Although the secondary investment risk of credit asset-backed securities is relatively high, it is also possible to obtain relatively high returns. This paper briefly lists the key points of concern, and Bian Xiao will analyze each indicator and the composition and influencing factors of secondary income in detail in subsequent articles.
2. The secondary income is inferior to the priority distribution, and the priority rating determines the secondary risk to some extent; On the other hand, paying attention to the overall credit rating of the underlying assets is not only about the priority credit rating, but also about the credit status of the entire collective assets. For example, the quality of credit assets (which of the five categories), the distribution of borrowers' credit rating, the weighted average credit rating of borrowers, and the credit rating of collective loans.