In a securitization, time tranching provides investors with the ability to choose between:
A) extension and contraction risks.
B) senior and subordinated bond classes.
C) fully amortizing and partially amortizing loans.

Question

Quizplus · Accepted Answer

Time tranching allows investors to choose between extension and contraction risks, which refer to the potential lengthening or shortening of the cash flow timeline. This can impact the yield and the duration of the investment. Senior and subordinated bond classes and fully/partially amortizing loans are not directly applicable to time tranching.

In a Securitization, Time Tranching Provides Investors with the Ability