Derivatives
Theta
May 31, 2021
Real Estate
Free and Clear Return
June 1, 2021

The change in the value of a tranche in reaction to a one basis point increase or decrease in the underlying credit spread or spreads. Knowing this value allows an investor to determine the amount of credit protection needed to be bought in order to offset the decline in tranche value should credit spreads increase by one basis point.

It is also known as a tranche DV01.

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