In this paper, we address the crucial problems of parameters estimation of Collateralized Debt Obligation (CDO). We present a methodology for fair spread estimation of reconstituted (CDO) from European market data. A fundamental part of the pricing framework is the estimation of default probabilities and the structure of dependency. We present a copula based simulation procedure for pricing CDO...

We propose an Interacting Particle System method to accurately calculate the distribution of the losses in a highly dimensional portfolio by using a selection and mutation algorithm. We demonstrate the efficiency of this method for computing rare default probabilities on a toy model for which we have explicit formulas. This method has the advantage of accurately computing small probabilities wi...

Correlation-dependent derivatives, such as Asset-Backed Securities (ABS) and Collateralized Debt Obligations (CDO), are common tools for offsetting credit risk. Factor models in the conditional independence framework are widely used in practice to capture the correlated default events of the underlying obligors. An essential part of these models is the accurate and efficient evaluation of the e...