The premium on an index tranche (CDS index tranche) is the spread paid by the protection buyer that equates the expected present value of default costs, to be borne by the protection seller (protection leg) to the expected present value of the amount invested in the tranche (premium leg/ cash leg).

The value of the premium leg represents the present value of the spread payments the protection seller receives from the protection buyer over the tranche term (e.g., quarterly payment dates).