In the curriculum, in Credit Default Swap chapter, they walk you through how to calculate expected loss with hazard rates.
However, I am really mixed up as to :
The loss to take in account is :
the value of coupon (underlying)
the coupon on the CDS contract
I have seen a few questions where they give info about the underlying but actually don’t use them (example Finquiz mock 6 (am) questions 55-60).
Thanks in advance !