We propose a simple computational method for constructing an arbitrage-free CDO pricing model which matches a pre-specified set of CDO tranche spreads. The key ingredient of the method is a formula for computing the local default intensity function of a portfolio from its expected tranche...

This paper introduces the CORE methodology for managing risk of multi-market central-counterparties. CORE generalizes the classical SPAN method of stress scenarios by incorporating explicitly market liquidity of listed instruments and modeling the liquidity pro file of OTC instruments and the...

We present a network model for investigating the impact on systemic risk of central clearing of over the counter (OTC) credit default swaps (CDS). We model contingent cash flows resulting from CDS and other OTC derivatives by a multi-layered network with a core-periphery structure, which is...

We study the feasibility and benefits of implementing an across-the-curve credit spread index for the Eurozone. We propose a methodology which takes into account specific features of Euro-denominated wholesale funding markets. We discuss the role for hedge accounting and the advantages of using...