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...

We propose a method for constructing an arbitrage-free multi-asset pricing model which is consistent with a set of observed single- and multi-asset derivative prices. The pricing model is constructed as a random mixture of N reference models, where the distribution of mixture weights is obtained...