Session 16 — ABS (SLABS • Credit Cards • Auto) • True/False Quiz

1) An ABS is a bond paid by cash flows from a pool of loans or receivables held in a trust (SPV).

2) In an ABS loss waterfall, senior tranches absorb losses before mezzanine and equity.

3) Over-collateralization, subordination, excess spread, and reserve accounts are rarely used in ABS today.

4) Most student-loan ABS (SLABS) pools are backed by federal Direct Loans made by the U.S. Department of Education.

5) Credit-card ABS typically use master trusts backed by revolving receivables (balances/fees) from many accounts.

6) Early-amortization triggers in credit-card ABS accelerate paydown to protect investors if performance deteriorates.

7) A lower Monthly Payment Rate (MPR) in credit-card ABS generally increases the risk of breaching trust triggers.

8) Auto-loan ABS receivables are revolving with no set term, like credit cards.

9) Auto-lease ABS cash flows include residual-value risk at lease end (car sale proceeds matter).

10) Mezzanine tranches usually offer higher coupons than senior tranches to compensate for greater loss risk.

11) The equity/residual piece of an ABS deal is typically rated investment-grade.

12) Using short-term repo to finance long ABS positions reduces margin-call risk during market stress.

13) ABS trade mainly on centralized stock exchanges rather than OTC dealers.

14) A credit rating is a guarantee that losses cannot occur.

15) If a single borrower in the pool defaults, all investor payments from the trust immediately stop.

16) Senior AAA tranches are risk-free and cannot be downgraded or impaired.

17) The residual/equity often captures remaining excess spread after fees, losses, and bond payments.

18) In many ABS waterfalls, servicing/admin fees are paid senior to bond interest.

19) SLABS performance is completely independent of servicing quality and borrower-assistance processes.

20) Historically, prime credit-card ABS seniors have been less resilient than mezzanine tranches across cycles.