NOTES ON EXACT AND SEMI-EXACT LÉVY MODELS FOR THE VALUATION OF CDOs

We investigate the effects of certain simplifying assumptions that are often made when valuating tranches of collateralized debt obligations (CDOs) using a firm's value approach. Those assumptions are the homogeneity and largeness of the portfolio and the so-called European approximation. The error made in this way is measured by comparing the result to a model with less simplification which is evaluated by the use of Monte Carlo simulation.

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Year of publication:	2010
Authors:	EICHLER, A. ; LEOBACHER, G. ; ZELLINGER, H.
Published in:	International Journal of Theoretical and Applied Finance (IJTAF). - World Scientific Publishing Co. Pte. Ltd., ISSN 1793-6322. - Vol. 13.2010, 06, p. 979-1000
Publisher:	World Scientific Publishing Co. Pte. Ltd.
Subject:	CDOs \| correlated debt \| Lévy one-factor model \| Monte Carlo simulation \| control variates

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Extent:	application/pdf text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008506138