Typically, deals with high OC (BB) test cushions are expected to perform well, though this is not always the case. The median deal with an OC test cushion of 4 to 5 percentage points performed well, achieving 15 basis points (bp) of alpha. Deals with a small OC test cushion experienced more significant underperformance. Among deals with less than 1 percentage point of cushion, approximately three-quarters performed poorer than the loan index.
Tags:OC Test Cushions