Interview Question

Vice President Interview Bangalore (India)

Structured Credit: Given a portfolio of 5 names of equal

  weight. What is the price of a First to Default Tranche for a. 100% Correlation b. 0% Correlation The 5 names have a CDS spread of 50,100,200,400 and 500 respectively. Would the price change if you are pricing a 0-20% tranche? Explain why?
Answer

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