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Basic Mechanics

Each series has a fixed spread for the life of the index

Current pricing reflected by exchanging the difference between current price and fixed spread

Fixed spread is 50bps, current price 53bps

Protection buyer pays up-front (53 – 50 =) 3bps

Protection buyer pays annual fixed spread

»

To Protection seller

Fixed spread is 50bps, current price is 46bps

Protection Buyer receives up-front 4bps

»

From Protection seller

Protection buyer pays annual fixed spread

»

To Protection seller

Credit Indices

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