Loss Trigger Leveraged Super Senior Tranche Valuation

The loss trigger leveraged super senior tranche (LT-LSS) valuation model is presented. A leveraged super senior tranche trade is a credit linked note, which provides investors with a leveraged exposure to the super senior tranche in a synthetic CDO transaction. The note holder earns the risk premium associated with selling protection on the entire senior exposure when the protection it provides is limited to only the funded principal amount which is just a fraction of the entire exposure.