Timing insurance is a liquidity support provided to the special purpose vehicle to cover mismatches of cash flows:
A)from its accounts receivable and accounts payable to all stakeholders
B)from its investment income and current liabilities
C)between the underlying mortgage pool and those required to be paid on the securitised assets
D)None of the listed options are correct.

Question

Quizplus · Accepted Answer

Timing insurance provides liquidity support to cover mismatches of cash flows between the underlying mortgage pool and those required to be paid on the securitized assets. This means that if there are any discrepancies between the cash flows from the mortgage pool and the required payments on the securities, timing insurance can help the special purpose vehicle to cover those mismatches. Options A and B are incorrect because timing insurance is not related to accounts receivable, accounts payable, or investment income. Option D is incorrect because there is a correct option - option C.

Timing Insurance Is a Liquidity Support Provided to the Special