This is the starting point of the SEC-SA series: a single-asset-class pool with no defaults and standard supervisory parameters. It walks through the SEC-SA mechanics in their simplest form — one pool, three tranches, one KA. Later scenarios layer in defaults, STS designation, NPE penalties, and resecuritisation to show how each feature shifts the capital outcome.

A securitisation is a financing technique in which a bank or other entity bundles a pool of loans — mortgages, auto loans, credit card receivables — and transfers them to a special purpose vehicle (SPV), which then issues bonds backed by those loan cashflows. Investors buy the bonds; the originating bank gets liquidity. What makes the structure work is tranching: the bonds are layered so that junior investors absorb the first losses, protecting senior investors above them.

Exposure at Default is the final output of SA-CCR. It combines Replacement Cost and Potential Future Exposure, scaled by the alpha factor of 1.4. EAD is computed twice — once under margined assumptions and once under unmargined — and the final figure is the minimum of the two.