STOCHASTIC INTENSITY MODELING FOR STRUCTURED CREDIT EXOTICS

We propose a class of credit models where we model default intensity as a jump-diffusion stochastic process. We demonstrate how this class of models can be specialised to value multi-asset derivatives such as CDO and CDO2 in an efficient way. We also suggest how it can be adapted to the pricing of option on tranche and leverage tranche deals. We discuss how the model performs when calibrated to the market.

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Year of publication:	2007
Authors:	CHAPOVSKY, ALEXANDER ; RENNIE, ANDREW ; TAVARES, PEDRO
Published in:	International Journal of Theoretical and Applied Finance (IJTAF). - World Scientific Publishing Co. Pte. Ltd., ISSN 1793-6322. - Vol. 10.2007, 04, p. 633-652
Publisher:	World Scientific Publishing Co. Pte. Ltd.

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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/10005050516