Claudio, Ferrarese (2006): A comparative analysis of correlation skew modeling techniques for CDO index tranches.
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In this work we present an analysis of CDO pricing models with a focus on “correlation skew models”. These models are extensions of the classic single factor Gaussian copula and may generate a skew. We consider examples with fat tailed distributions, stochastic and local correlation which generally provide a closer fit to market quotes. We present an additional variation of the stochastic correlation framework using normal inverse Gaussian distributions. The numerical analysis is carried out using a large homogeneous portfolio approximation.
|Item Type:||MPRA Paper|
|Institution:||King’s College London|
|Original Title:||A comparative analysis of correlation skew modeling techniques for CDO index tranches|
|Keywords:||default risks; CDOs; index tranches; factor model; copula; correlation skew; stochastic correlation|
|Subjects:||C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C60 - General
C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
|Depositing User:||Claudio Ferrarese|
|Date Deposited:||06. Feb 2007|
|Last Modified:||12. Feb 2013 04:20|
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