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Hi,I'am trying to calculate base correlation for CDX.NA.IG standard tranches. I'm using the algorithme discribed in the Merril Lynch pas paer "Base Correlations" Nov.10, 2004. I have 3 questions :1) I'm using an intensity model with a Normal copula, first of all, I'm trying to find the default intensity with the 0-3% tranche spread's and correlation's. But the spread is 34.75%+500bp (upfront+running spread), how can i consider the upfront payment to calibrate my intensity model?2)is this algorithe the right one :- find the price of the 0-3 thanche with the 3-7 premium, i.e. with my gaussian model take the 0-3 correlation as an input and try to find the default intensity that make my model's outpout spread equals the given 0-3% spread (after resolving the problem of the upfront payment). Then take the 3-7% spread a replace it to find the wanted price like this : MTM = DefLeg-Spread*PremiumLeg. -so rescale the price with the 3-7 width i.e. MTM (0-3% with 3-7% spread) * 3 /7Use the Normal copula model in reverse to extract the 0-7% base correlation implied by the price of the 0-7% tranche with the 3-7% premiumwhat do u think about that pls ?

I'm no expert but.... I think that you need to use either individual credit spreads for the names which make up CDX to infer individual default intensities or an index swap spread to infer an average default intensity.... once you've done that you can use tranche quotes to infer the base correlation.

yeah u'r right. But I don't have that. So I'm trying to calibrate my model's defaut intensity. but it doesn't work well