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Consider the iTraxx Europe 5-year index (newly constituted). With quarterly payments and a quoted CDS spread on the index of 24 bps. Find the

Consider the iTraxx Europe 5-year index (newly constituted). With quarterly payments and a quoted CDS spread

Consider the iTraxx Europe 5-year index (newly constituted). With quarterly payments and a quoted CDS spread on the index of 24 bps. Find the corresponding constant conditional default probability (conditional on no default in earlier periods) expressed as a default intensity. Assume a 40% recovery rate, a correlation of 0.15, and that the term structure of risk-free rates is flat at 3.5%.

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