Finance Junkie
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Postby » Tue Sep 09, 2014 11:21 am

123.4 Assume a protection seller enters into a senior basket CDS, which in addition to
covering the upper 40% in notional ($20 million) has an aggregate threshold of $10.0
million such that no payouts are triggered until the threshold is reached in aggregate losses
(no limit on individual reference losses). The senior CDS then pays for all losses in the $20 X
$30 tranche but only for losses above a $10 million aggregate threshold. What is the payout
on this senior basket CDS?
a) $1 million
b) $4 million
c) $5 million
d) $10 million

Can any one explain how to answer this question

Finance Junkie
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Postby edupristine » Thu Sep 25, 2014 11:22 am

Please provide the exact source of this question.

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