The Linear Swap Rate Model seems to give larger corrections than the traditionnel adjustment. And the difference increases with volatility which is an additionnel problem.Is there another kind of adjustment in that case ? (High volatilities)

Another problem rises with closed formula (at least when you use a black model) is the accuracy of the convexity adjustment for large maturities and/or high volatilities. However with the tree you don't have this problem.

You can add to it the separation betwenn Acceleration or no Acceleration.In the first case, the holder of the payer option use his right to buy protection just after the default of the underlying, however in the 2nd case he waits until the Maturity to use it.

<r>There is a paper published by Hull&White where you can find the formulas. It should be available on <URL url="http://www.defaultrisk.comAs">www.defaultrisk.comAs</URL> for the greeks I think that they have the same meanings, except that in the practice the hedge is done with the CDS Spot and ...

Thanks Jarod,I haven't seen the Brokers' qutations yet.I will check this

You should read "Upfront + Feeleg(0-3%, BC) = DefLeg (0-3%, BC)" asUpfront + Feeleg(0-3%, BC, 500bps as premium) = DefLeg (0-3%, BC)Thanks

<t>Hi Jarod,I don't find the same Base Correlations as JPMorgan. So I have two questions.1. Do you convert the Upfront premium into running one? If so, How? (Upfront/Duration of the Equity + 500 bps ? or another method)2.Do you find the Equity Implied (or Base) Correlation using the following : you ...

<t>Hi everybody,I am interested in the Hedging question too.I would like to know if you use the methodology explained by Bear Stearns in their paper distributed in Madrid. They compute the hedge for a Mezzanine tranche as the difference between the hedges of the Equity "Base" tranches. The 3-7% Hedg...