Consistent Valuation of Bespoke CDO Tranches
نویسندگان
چکیده
منابع مشابه
Consistent Valuation of Bespoke Cdo Tranches
This paper describes a consistent and arbitrage-free pricing methodology for bespoke CDO tranches. The proposed method is a multi-factor extension to the (Li 2009) model, and it is free of the known flaws in the current standard pricing method of base correlation mapping. This method assigns a distinct market factor to each liquid credit index and models the correlation between these market fac...
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We present new formulae for the valuation of synthetic collateralized debt obligation (CDO) tranches under the one-factor Gaussian copula model. These formulae are based on the wavelet theory and the method used is called WA. We approximate the cumulative distribution function (CDF) of the underlying pool by a finite combination of jth order B-spline basis, where the B-spline basis of order zer...
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Service) collaborative project for which we are very grateful. The authors also thank Marek Rutkowski for useful discussions and comments.
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This research work investigates the theoretical foundations and computational aspects of constructing optimal bespoke CDO structures. Due to the evolutionary nature of the CDO design process, stochastic search methods that mimic the metaphor of natural biological evolution are applied. For efficient searching the optimal solution, the nondominating sort genetic algorithm NSGA-II is used, which ...
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There are two basic ideas behind the new model. Firstly, the tails of the normal distribution are too light to match the reality of market tails. In the equity market this is a recognised truth and low-strike equity premia are much higher than log-normal models would indicate. It can also be seen in the problems that simple Brownian structural models have when they underestimate short-term defa...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2010
ISSN: 1556-5068
DOI: 10.2139/ssrn.1577404