In a CDO, suppose there are three tranches: A gets first claim to all cash flows from

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In a CDO, suppose there are three tranches: A gets first claim to all cash flows from the collateral, B gets second claim, and there is a residual equity tranche E. Suppose the level of default risk in the economy declines but the correlations of default increase. What would be the likely impact of this on the values of the three tranches?

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