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

Investing in credit portfolios involves assessing the potential payouts in various default scenarios. In this case, we are presented with a credit portfolio comprising three credits with different notional values and respective post-default values. Assumed Reference Credit Portfolio:
- 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.
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