In its complexity and its vulnerability to market volatility, the constant proportion debt obligation (CPDO) might be viewed as the poster child for the excesses of financial engineering in the credit market. This paper examines the CPDO as a case study in model risk in the rating of complex...

We take an asset pricing approach to model the funding advantage of Government Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac. In order to replicate some stylized facts, we extend a referenced model to incorporate defaultability of mortgage agencies. The model implies that the...

In its complexity and its vulnerability to market volatility, the CPDO might be viewed as the poster child for the excesses of financial engineering in the credit market. This paper examines the CPDO as a case study in model risk in the rating of complex structured products. We demonstrate that...

In this paper we examine the cost of using recalibrated single-factor <p> models to determine the exercise strategy for Bermudan swaptions in a <p> multi-factor world. We demonstrate that single-factor exercise strategies <p> applied in a multi-factor world only give rise to economically insignificant <p>...</p></p></p></p>

In this paper we study and implement a finite difference version of the augmented <p> state variable approach proposed by Hull & White (1993) that allows for pathdependent <p> securities. We apply the method to a class of path-dependent interest <p> rate derivatives and consider several examples...</p></p></p>

In this paper we analyze the mortgage choice faced by Danish borrowers. <p> Based on an analysis of the most popular Danish mortgage products, <p> we argue that Adjustable-Rate Mortgages (ARM) with life time caps will <p> combine the most attractive features from straight ARMs and callable <p> Fixed-Rate...</p></p></p></p>

This paper concerns the problem of valuing Bermudan swaptions in <p> a Libor market model. In particular we consider various efficiency improvement <p> techniques for a Monte Carlo based valuation method. We <p> suggest a simplification of the Andersen (2000) exercise strategy and find <p> it to be much...</p></p></p></p>

This paper investigates the effect of adding a distinct feature of the Danish mortgage market to the market in the United States. This feature, a buyback option, enables mortgagors to buy back their share of the mortgage-backed security at market price. Extending a standard referenced pricing...