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  • April 10, 2022
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Premium Leg of a CDO Tranche

The premium leg of a CDO tranche constitutes the regular payments that are proportional to the difference between the tranche notional and the cumulative default losses. It is calculated as the sum of discounted cash flows paid by the trancheholder (the protection buyer) to the projection seller.

The other leg of a CDO tranche is called a default leg (also a floating leg).

The premium leg is also known as a fixed leg.


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