An Empirical Study of Pricing and Hedging Collateralized Debt Obligation

• Main Authors: Cao, Lijuan, Zhang, Jingqing, LIM, Kian Guan, ZHAO, Zhonghui
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: Collateral debt obligation (CDO) pricing; Monte Carlo; Default correlation; Copula; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/974; https://doi.org/10.1016/S0731-9053(08)22002-5
• Institution: Singapore Management University

This paper studies the pricing of collateralized debt obligation (CDO) using Monte Carlo and analytic methods. Both methods are developed within the framework of the reduced form model. One-factor Gaussian Copula is used for treating default correlations amongst the collateral portfolio. Based on th...