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Title:

Pricing of a CDO on Stochastically Correlated Underlyings

Document type:
Zeitschriftenaufsatz
Author(s):
Escobar, M.; Götz, B.; Seco, L.; Zagst, R.
Non-TUM Co-author(s):
ja
Cooperation:
international
Abstract:
In this paper, we propose a method to price Collateralized debt obligations (CDO) within Merton’s structural model on underlyings with a stochastic mean-reverting covariance dependence. There are two key elements in our development, first we reduce dimensionality and complexity using principal component analysis on the assets’ covariance matrix. Second, we approximate this continuous multidimensional structure using a tree method. Trinomial-tree models can be developed for both the principal com...     »
Intellectual Contribution:
Discipline-based Research
Journal title:
Quantitative Finance
Year:
2010
Journal volume:
10
Journal issue:
3
Pages contribution:
265-277
Reviewed:
ja
Language:
en
Status:
Erstveröffentlichung
Semester:
SS 02
Format:
Text
Key publication:
Nein
Peer reviewed:
Ja
International:
Ja
Book review:
Nein
Commissioned:
not commissioned
Professional Journal:
Nein
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