Home / Questions / Consider a [0%, 5%] super senior tranche , and a index CDS spread of 400 bps for 5 years maturity as
Consider a [0%, 5%] super senior tranche , and a index CDS spread of 400 bps for 5 years maturity assuming 0% recovery and 0% interest rates. Weâ€™ll be pricing this tranche using one factor gaussian copula.a) What is the tranche expected loss ?b) What is the effect of correlation for equity tranche expected loss and par CDS spread?use 1%, 10%, 20%, 30% gaussian copula correlation and compute the par spread and expected loss.c) How do you hedge the super senior tranche with the index?
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