Excess spread level

In the following example, the spread account starts to trap excess spread when the 3-month average excess spread level is 5% or lower. As the excess spread level continues to decrease, the level of spread that is trapped increases to a maximum of 5% of the total transaction size. 

Excess spread is available to build up the reserve fund to its required level and cover any principal deficiencies. For example, in the Holmes Financing transactions there is a mechanism whereby, if the yield on the mortgages falls below a certain specified level, excess spread will be trapped in a second reserve fund to provide additional credit enhancement as compensation for the reduction in excess spread. 

To date, the main reserve funds in master trust transactions have been standard fixed cash amounts that are available to the issuer to cover any shortfalls in income or principal losses during the life of the transaction. The reserve funds are built up to their required levels through trapped excess spread. 

The class C noteholders benefit from a dynamic spread account. If 3-month average excess spread falls below a predetermined level, the spread account builds from monthly excess spread until the target level is reached. In order to fully understand the protection afforded by the spread account we need to assess the degree to which the spread account traps excess spread. Exhibit 13.10 shows excess spread trigger levels and trapping levels for a typical credit card issue. 

As the spread account traps excess spread over a period of deteriorating collateral performance, a driving factor in the effectiveness of the spread account is the rate at which the excess spread decreases. If the collateral performance deteriorates slowly, the spread trapping mechanism will most likely be able to trap the maximum amount of spread allowed. However, if there is a rapid deterioration in the collateral performance, the spread trapping mechanism may not be able to trap the maximum allowable amount of spread before the excess spread in the transaction turns negative. Exhibit 13.11 shows a scenario in which excess spread deteriorates from an initial level of 9% to zero over a 36-month period. After 12 months, 3-month average excess spread falls to 5% and excess spread is getting trapped. 

In this example, the dynamic spread account builds up to the maximum 5% of the transaction size. The spread account reaches the maximum of 5% in month 33 and then stays at this level. Exhibit 13.12 shows a scenario in which excess spread falls from the initial 9% to zero within 24 months, that is, the same deterioration in excess spread as in the previous example happens over a 2- instead of a 3-year period. 

Excess spread is important because it is the first line of protection for noteholders in that it absorbs charge-offs. While this is true, two portfolios with similar levels of excess spread can behave very differently in a worsening economic environment. Exhibit 13.21 shows excess spread for two different credit card portfolios. 

Strictly speaking, the FIAT 1 transaction does not generate excess spread. This explains the high level of credit enhancement from the unrated class M notes (usually, unrated tranches are either privately sold or kept as an equity tranche by the originator). On the closing date, an amount of notes was issued which was equal to the net present value of all future cash payments due from the collateral (as opposed to the principal balance of the collateral). The discount rate used was the fixed rate payable to the swap counterparty (swap rate plus coupon on the class A notes and all fees associated with the transaction). Structured this way, the receivables always yield the discount rate, leaving no excess spread in the transaction. However, losses on the FIAT 1 portfolio can be covered to a certain degree from interest collections because the structure provides for delinquent principal and defaults to be covered before interest is paid on the class M notes. 

Air-dried straw stems (150 g dry wt at about 9-13 wt% moisture) were weighed onto a clean, dry, tared tray and spread in a thin (5-cm) layer. The homogenized mycelial inoculum slurry was then sprayed onto the stems, with frequent mixing of both the inoculum and the stems. Sufficient inoculum was added to reach the desired initial level of fungal inoculum in the stems. Periodically during addition of inoculum, a fan was used to blow nonsterile air across the tray of inoculated straw to evaporate excess water,... 

The current availability of small portable 14 MeV neutron generators and the future availability of high intensity 252Cf spontaneous fission neutron sources will certainly result in the wide spread use of activation techniques for non-destructive "on-stream" product analysis in industry. The cost of the required instrumentation for many types of activation analysis is not excessive, as compared to the cost of other modem analytical instrumentation. The simple off-on operation of the new sealed-tube neutron generators and minimal maintenance associated with the use of an isotopic Z5ZCf neutron source will permit operation of the analytical facility with technician-level personnel. The versatility of the activation technique justifies its inclusion among the other major analytical techniques employed in any modem analytical facility. 

Suppose the vacuum to be filled with a uniform radiation field, or waves. Interaction of this field with an emitter, in an excited state, causes modulation of the wave field that spreads in the form of a spherical retarded wave. On reaching a suitable absorber, at a lower energy level, the modulation stimulates a matching sympathetic response, which is returned as an advanced wave, that reaches the emitter at the very time of initial modulation. Such a superposition of advanced and retarded waves amounts to the creation of a standing wave between emitter and absorber. Emitter and absorber are now in contact and the transaction is completed on the transfer of excess energy to the absorber. The standing wave that persists for the duration of the transaction triggers the transfer in the form of a photon. 

To estimate the spatial extent of the excess associated with this source candidate the excess was fit to a Gaussian convoluted with Milagro s point spread function. A four parameter fit was performed where the width (a), position (RA, ) and amplitude were allowed to vary. The best estimate of the source position and width are RA=78.8° 0.4°, 5 = 26.0° 0.4°, and a = (0.8 0.4)°. The excess is inconsistent with a point source hypothesis at the ss 2a level. The flux of this candidate is 85% of the Crab. The excess was also found to grow steadily over time. There is no evidence of episodic emission. 

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