An Integro-differential Equation for Pricing CDO
نویسنده
چکیده
where ( ) ( ) + − − − = β α ) ( ) ( ) ( t l t l t M , ( ) ( ) + − − − = ) ( ) ( ) ( t l t l t N α β ; ) (t l is the cumulative default loss at time t ; α and β denote the tranche attachment and detachment points , respectively; ) , ( s t B is the timet price of a pure discount bond maturing at times , and ) , ( s t f the instantaneous forward rate; ω is the payment interval for tranche premium p ; t t = 0 , T tn = ; and wlog, all notionals are unitary.
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