Question

How does a CMBS structure with multiple tranches mitigates risk from the perspective of investors?

How does a CMBS structure with multiple tranches mitigates risk from the perspective of investors?

Homework Answers

Answer #1

CMBS are commercial mortgage backed securities where the underlying investment is commercial properties not residential properties. This is one way to provide liquidity to the investors in real estate. The way CMBS works for the investors is there are different tranches and they are classified into different traches based on the liquidity and risk factor. With the different level of tranches, the interest rate also differs. The highest quality tranches have low interest rate but high liquidity and safety of the investment, lower tranches have high interest rates but higher risk associated with it. So the CMBS divides the risk into different tranches and investor can enter into transaction with their own level of risk and perception of the market.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A commercial mortgage back security CMBS is secured ona set of properties worth a total of...
A commercial mortgage back security CMBS is secured ona set of properties worth a total of $500 million, and its total outstanding balance is $400M. There are three tranches in this CMBS: a senior tranche with an outstanding balance (OSB )$200M, messanine tranche with OSB $150M and a junior tranche with OSB $50M. a. What LTV ratio in a first mortgage whole loan issuance would correspond to the default risk structue of each tranche? b. How do the risk structures...
Describe Dr. Lu’s “life-course perspective.” How does it broaden conventional approaches, which focus primarily on risk...
Describe Dr. Lu’s “life-course perspective.” How does it broaden conventional approaches, which focus primarily on risk factors during pregnancy? What are the mechanisms by which experiences outside the body and before conception can affect birth outcomes? Describe how the life-course perspective supports a link between racism and premature birth or low birth-weight babies.
From your perspective, what are the current shifts in global stratification? How does this affect the...
From your perspective, what are the current shifts in global stratification? How does this affect the economic and political power of the United States?
what is systematic risk? how does it differ from total risk?
what is systematic risk? how does it differ from total risk?
How might a sociologist see homelessness from a cultural context? Does a global perspective of homelessness...
How might a sociologist see homelessness from a cultural context? Does a global perspective of homelessness influence our perception of homelessness in America?
Does weather create systematic or unsystematic risk for investors? If you answered that weather creates systematic...
Does weather create systematic or unsystematic risk for investors? If you answered that weather creates systematic risk, explain why you would not be able to diversify away weather-related risk in a portfolio. If you answered that weather creates unsystematic (company-specific) risk, explain how you would eliminate weather-related risk in a portfolio.
how does the anionic detergent differ from the cationic detergent in its structure. give the structure...
how does the anionic detergent differ from the cationic detergent in its structure. give the structure of an anionic and cationic detergent
What impact the organization's structure and culture have on internal controls (from an accounting perspective) over...
What impact the organization's structure and culture have on internal controls (from an accounting perspective) over financial reporting.
This is a philosophy question 1.) Who developed the Logical Positivist perspective? 2.) How does this...
This is a philosophy question 1.) Who developed the Logical Positivist perspective? 2.) How does this perspective view explanation? 3.) How does Popper's views differ from Kuhn's? 4.) If you were to apply their views to your life, what questions would they have you ask?
How are investors in pass-through securities protected against default risk emanating from the mortgagees and the...
How are investors in pass-through securities protected against default risk emanating from the mortgagees and the FI/trustee? A) In cases where the bank or the trustee defaults on the timely pass-through of the mortgage payments, GNMA will make the payments. B) State governments insure them and thus, make the payments. C) There is no credit risk and thus, no default risk. D) The local government will chip in and make half of the payments. E) None of the above