Pricing and Risk Management of Synthetic CDOs

  • Anna Schlösser
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 646)

Table of contents

  1. Front Matter
    Pages i-xii
  2. Fundamentals

    1. Front Matter
      Pages 5-5
  3. Introduction

    1. Anna Schlösser
      Pages 1-4
  4. Fundamentals

    1. Front Matter
      Pages 5-5
    2. Anna Schlösser
      Pages 7-66
    3. Anna Schlösser
      Pages 67-92
  5. Static Models

    1. Front Matter
      Pages 93-93
    2. Anna Schlösser
      Pages 95-127
    3. Anna Schlösser
      Pages 129-163
  6. Term-Structure Models

    1. Front Matter
      Pages 165-165
    2. Anna Schlösser
      Pages 167-176
    3. Anna Schlösser
      Pages 227-252
    4. Anna Schlösser
      Pages 253-256
  7. Back Matter
    Pages 257-268

About this book

Introduction

This book considers the one-factor copula model for credit portfolios that are used for pricing synthetic CDO structures as well as for risk management and measurement applications involving the generation of scenarios for the complete universe of risk factors and the inclusion of CDO structures in a portfolio context. For this objective, it is especially important to have a computationally fast model that can also be used in a scenario simulation framework. The well known Gaussian copula model is extended in various ways in order to improve its drawbacks of correlation smile and time inconsistency. Also the application of the large homogeneous cell assumption, that allows to differentiate between rating classes, makes the model convenient and powerful for practical applications. The Crash-NIG extension introduces an important regime-switching feature allowing the possibility of a market crash that is characterized by a high-correlation regime.

Keywords

Collateralized Debt Obligations Correlation Credit Portfolio Economic Scenario Generation Factor Copula Model

Authors and affiliations

  • Anna Schlösser
    • 1
  1. 1., Hedging & Derivatives Strategiesrisklab GmbHMunichGermany

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-642-15609-0
  • Copyright Information Springer-Verlag Berlin Heidelberg 2011
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Business and Economics
  • Print ISBN 978-3-642-15608-3
  • Online ISBN 978-3-642-15609-0
  • Series Print ISSN 0075-8442