In regards to a CDO structure, at least an A rating is typically sought for the ________ at least a B rating is sought for the ________.

Question

Quizplus · Accepted Answer

In a CDO structure, the senior tranches are the most senior and have the highest priority to receive payments from the underlying assets. Hence, they are sought to be rated at least A. Mezzanine tranches are next in line and have a lower priority compared to senior tranches. Therefore, a rating of at least B is sought for them. Subordinate/equity tranches are the riskiest and have the lowest priority for payments, hence they have the lowest rating.

In Regards to a CDO Structure, at Least an a Rating