This study deals with the pricing and hedging of inflation-indexed bonds. Under foreign exchange analogy we model the nominal short rate, real short rate and logarithm of the price index with an affi ne Gaussian process. Using the underlying a ffine property, we compute the nominal and...

This study deals with the dynamic hedging of single-tranche collateralized debt obligations (STCDOs). As a first step, we specify a top-down affine factor model in which a catastrophic risk component is incorporated in order to capture the dynamics of super-senior tranches. Next, we derive the...

We propose an affi ne two-factor model for the pricing of single-tranche collateralized debt obligations by following the general top-down framework introduced in Filipovic et al. [2011]. Apart from being analytically tractable, this model has the feature that it incorporates a catastrophic risk...