Which tranche to buy when prepayment increases

[claricetay]

If there are 4 tranches (Tranche A being the highest priority trance and Tranche D being the lowest), and I would like to purchase one tranche to split into PO and IO strip because I believe prepayments will increase, which tranche should I buy?

 

[Nicole Seaman]

If there are 4 tranches (Tranche A being the highest priority trance and Tranche D being the lowest), and I would like to purchase one tranche to split into PO and IO strip because I believe prepayments will increase, which tranche should I buy?

Hello @claricetay

Welcome to the BT forum! I just wanted to let you know that we have a search and tag function in the forum that is very helpful for questions like this. If you search or use the tag "tranche", you will see that a lot of forum threads discuss these concepts. There is over a decade of FRM discussion in our forum so using the search function can provide you with an answer without having to wait for someone else to answer you. Also, because the forum is so busy right before the exam, we are not able to answer all questions that are asked.

Thank you and I hope this is helpful!

Nicole