I understand the concept behind credit tranching with the structure and having lower credit absorbing the losses first before B holders, and then A.
However, does someone have an example with time tranching? Lets say a customer defaults and losses are $10M
Bond Holder A: $2M par value
Bond Holder B: $6M par value
Bond Holder C: $4M par value
Now would you take A first, then B, then C for TIME TRANCHING?
For Credit, you would take C first, then B, (A would not absorb any losses as C and B take it all).