What is the difference between pool-level and loan-level analysis?
What will be an ideal response?
The analysis of prepayments can be performed on a pool level or a loan level. In pool-level analysis it is assumed that all loans comprising the collateral are identical. For an amortizing asset, the amortization schedule is based on the gross weighted-average coupon (GWAC) and weighted-average maturity (WAM) for that single loan. Pool-level analysis is appropriate where the underlying loans are homogeneous. Loan-level analysis involves amortizing each loan (or group of homogeneous loans). Thus, the major difference is that pool-level analysis focuses upon examining a larger group of loans whereas loan-level analysis concentrates on examining a loan individually (or a small group of loans that have similar qualities).
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What is the difference between the Cp and Cpk measures? Provide an example of a situation in which a process might perform well on one measure but poorly on the other
What will be an ideal response?
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