Assessing Credit Portfolio: Investor's Payout Calculation
What is the outcome an investor will receive if credits 2 and 3 default in a second-to-default basket given the credit portfolio data presented?
The investor will receive $131,049.1 as per the provided credit portfolio information.
Understanding Credit Portfolio Payout Calculation
- Credit 1: $100,000 notional, post-default value $32,919.3 - Credit 2: $200,000 notional, post-default value $55,527.3 - Credit 3: $250,000 notional, post-default value $76,521.8 Given a $550,000 structure, if credits 2 and 3 default in a second-to-default basket (in that order), the investor needs to calculate the total payout amount. This calculation involves summing up the post-default values of credits 2 and 3. Calculation:
- Credit 2 post-default value: $55,527.3 - Credit 3 post-default value: $76,521.8 - Total Payout = $55,527.3 + $76,521.8 - Total Payout = $131,049.1 Therefore, if credits 2 and 3 default in a second-to-default basket as per the given credit portfolio data, the investor will receive $131,049.1. This calculation showcases the importance of understanding credit portfolio structures and potential investor payouts in different default scenarios.