Monte Carlo Analysis of Single Tranche

Tranche (Structure) Information         Tenor (yrs)  

Attach (%)       Detach (%)       Prem. (% pa)    


Asset Risk Information

Default Prob. (% pa)       Loss Given Default (%)    


Asset Correlation Information (by Region and Industry, all %)

Broad   Same R   Same I   Same R+I


We apply Monte Carlo simulation to determine the distribution and timing of losses. As a simple first version, the user specifies weighted average PD and LGD values. The underlying loan portfolio has obligors all in the same Region and diversified evenly over 20 Industries. Recovery amounts amortize the risk exposure (hence there is no reinvestment). Excess revenue, if any, amortizes Note principal. The Bank Lender pays a Tranche Premium to buy default protection from the Note Investor. This Investor pays the Note Par upfront (as Collateral) and then receives stated Coupon plus return of the lesser of Par and Remaining Collateral.


Waterfall Information

Note Coupon (% pa)       Collateral Coupon (% pa)  


Number of MC Trials  


Probability of Loss (%)    

Expected Loss (% of Tranche)