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  1. R

    Short Equity T + long Mezzannine T (correlation impact?)

    Hi David, I am struggling to understand this concept of loss occurring (i.e Spread change in Equity Tranche and Mezzanine Tranche). 1) Why does Equity Tranche spread increases if the correlation decreases as shown in the graph below. (eg. If correlation is high in the equity tranche - the...
  2. F

    Impact of intra-tranche default correlation on different CDO tranches

    Hello. I wonder if my understanding is correct with regards to the impact of intra-tranche default correlation on value of different CDO tranches. 1. Equity tranche: when correlation increases, the value of the tranche increases because now there is higher chance of the underlying assets...