collateralized mortgage obligations optimization

Risk Analysis of Collateralized Debt Obligations

Collateralized debt obligations, which are are securities with payoffs that are tied to the cash flows in a portfolio of defaultable assets such as corporate bonds, play a significant role in the financial crisis that has spread throughout the world. Insufficient capital provisioning due to flawed and overly optimistic risk assessments is at the center of the problem. This paper develops stocha...

Bank Collateralized Loan Obligations: An Overview

Collateralized loan obligation (CLO) volume has increased significantly over the past two years (see chart, page 2). Third-quarter 1997 issuance hit a record-breaking $25.5 billion, more than doubling the 1996 volume of $11.5 billion. Furthermore, by year end, it is estimated that the total volume for collateralized bond obligations (CBOs) and CLOs will reach $35 billion– $40 billion. With larg...

Securitization & Hedge Funds: Collateralized Fund Obligations

The Hidden Correlation of Collateralized Debt Obligations

We propose a model for the correlation structure of reference portfolios of collateralized debt obligations. The model is capable of exhibiting typical characteristics of the implied correlation smile (skew, respectively) observed in the market. Moreover, it features a simple economic interpretation and is computationally inexpensive as it naturally integrates into the factor model framework.

Simulation Methods for Risk Analysis of Collateralized Debt Obligations

Collateralized Debt Obligations (CDOs) are sophisticated financial products that offer a range of investments, known as tranches, at varying risk levels backed by a collateral pool typically consisting of corporate debt (bonds, loans, default swaps, etc.). The analysis of the risk-return properties of CDO tranches is complicated by the highly nonlinear and time dependent relationship between th...

An Incomplete-Market Model for Collateralized Debt Obligations

This article describes a model that appropriately treats the incompletemarket aspects of collateralized debt obligations (CDO’s). The model is a term-structure model that can be calibrated so that it precisely reproduces, in terms of a single set of model parameters, the market values of the prices of contracts on a number of different tranches and having a number of different maturities for ea...