Question: Consider a structure with 10 assets. There are 3 tranches with the given default attachment points. 0%to15% Tranche1 15%to30%Tranche2 30% to 100% Tranche 3 The

Consider a structure with 10 assets. There are 3 tranches with the given default attachment points.

0%to15% Tranche1

15%to30%Tranche2

30% to 100% Tranche 3

The risk-neutral default probability for each firm is 10%. The structure is for 1 year. What are the expected defaults for each tranche assuming correlation between firms is 0%, 25%, 50%, and 100%? Do via Monte-Carlo simulation with at least 100 simulations.

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