A hypothetical question

guigiraud · December 1st, 2009, 4:05 pm

Hi,We own protection on the 3-7% index tranche which is now only has 0.0001% subordination (i.e. any credit event will mean that the tranche is eaten into).A full coupon was paid on 20/09/2009Entity A defaults on 01/10/2009Entity B defaults on 05/10/2009Entity B settles before entity A, and settles on 12/10/2009Entity A settles on 16/10/2009On settlement of entity B on 12/10/2009 how is the accrued calculation handled given that we still do not know what the final recovery of entity A will be?Thanks