With respect to subprime deals, it a trigger that determines the collateral tests. It is one of the specific features of the excess spread (XS) and overcollateralization (OC) of the deal. This trigger is designed to allow the deal structure to follow one of two modes: 1) for well-performing collateral, the so-called “Dr. Jekyll mode” and 2) for poorly performing collateral, the so called “Mr. Hyde mode“.

Mainly, there are two types of subprime triggers: 1) a trigger that tests the cumulative losses against an increasing loss pattern (hence it is called a cumulative loss trigger) and 2) a trigger that test delinquencies (typically 60 days and more) (hence the name “delinquency trigger“).