Stein's method and zero bias transformation for CDO tranche pricing
نویسندگان
چکیده
We propose an original approximation method, which is based on the Stein’s method and the zero bias transformation, to calculate CDO tranches in the general factor framework. We establish first-order correction terms for the Gaussian and the Poisson approximations respectively and we estimate the approximation errors. The application to the CDOs pricing consists of combining the two approximations.
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ورودعنوان ژورنال:
- Finance and Stochastics
دوره 13 شماره
صفحات -
تاریخ انتشار 2009