Publication
CDOs in the light of the current crisis
| dc.contributor.author | Gaspar, Raquel M. | |
| dc.contributor.author | Schmidt, Thorsten | |
| dc.date.accessioned | 2010-11-24T11:37:46Z | |
| dc.date.available | 2010-11-24T11:37:46Z | |
| dc.date.issued | 2008-06 | |
| dc.description.abstract | This paper proposes a top-down model for pricing Collateralized Debt Obligation (CDOs). Our proposal is both treatable and realistic, in the sense we are able to obtain closed-form solutions to single tranche CDOs and capturing extreme credit events. We use as key ingredients the so-called (T, x)-bonds, as proposed in Filipovic, Overbeck, and Schmidt (2008), but generalize their affine specificationby including shot-noise processes. Our claim is that affine diffusions combined with shot-noise processes lead to an improved modeling of CDO spreads in comparison to existing affine jump-diffusion models. The proposed approach allows in particular for better capturing the possibility of extreme events, like the ones underlying the current crisis. We illustrate our results with a very concrete (simple) instance of our class of models. Finally, we identify the connections between the top-down and bottom-up approaches for modeling credit risk, within our class of models. Concretely, we show that even when taking a bottom-up approach the aggregate loss process would be a process of affine shot-noise type. | por |
| dc.identifier.citation | Gaspar, Raquel M. and Thorsten Schmidt. (2008). "CDOs in the light of the current crisis". Instituto Superior de Economia e Gestão. Departamento de Gestão – ADVANCE .Working paper nº 2-08. | por |
| dc.identifier.uri | http://hdl.handle.net/10400.5/2559 | |
| dc.language.iso | eng | por |
| dc.publisher | ISEG - Departamento de Gestão | por |
| dc.relation.ispartofseries | DG/ ADVANCE Working paper nº 2-08. | |
| dc.relation.publisherversion | http://pascal.iseg.utl.pt/~advance/200802.pdf | por |
| dc.subject | CDOs | por |
| dc.subject | Shot-Noise Processes | por |
| dc.subject | Affine Models | por |
| dc.title | CDOs in the light of the current crisis | por |
| dc.type | working paper | |
| dspace.entity.type | Publication | |
| rcaap.rights | openAccess | por |
| rcaap.type | workingPaper | por |