Ilya, Gikhman (2008): Multiple risky securities valuation I.
Download (167kB) | Preview
In this paper we develop an approach to valuation of a multiple names security portfolio. The goal of the paper to present pricing and calculation of the risk characteristics of the corporate debt based on randomization of the historical data of portfolio assets. Our approach close but it does not coincide with the reduced form interpretation of the credit risk. Based on stochastic interpretation of the default it follows that the market price of a bond is a stochastic process. Therefore, a spot price of a corporate bond implies risk and the bond value shows how market weights the risk. We will show in details how default correlation within securities will affect the basket exposure.
|Item Type:||MPRA Paper|
|Original Title:||Multiple risky securities valuation I.|
|Keywords:||Credit derivatives, risky portfolio valuation, copula, perfect copula, CDS, CDO|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance; Insurance Companies
G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing
|Depositing User:||Ilya Gikhman|
|Date Deposited:||04. Nov 2011 02:03|
|Last Modified:||14. Feb 2013 22:13|
1. Burtschell, X., Gregory, J., Laurent, J.-P., A comparative analysis of CDO pricing models. Working Paper, 2005.
2. Gikhman, I., Corporate Debt Pricing, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=10185373.
3. Gikhman, I., Risky Swaps. ICFAI Journal of Derivative Markets. July 2008.
4. Hull, J. and White, A., The Perfect Copula, Working Paper, University of Toronto, 2005.
5. Li, D., On Default Correlation: A Copula Approach, Journal of Fixed Income, 9, 2000, 43-54.
6. Merton, R., On the pricing of corporate debt: The risk structure of interest rates. Journal of Finance, 2, 449-471.
7. Vasicek, O.A., Probability of loss on loan portfolio, KMV Corporation, 1987.
8. Vasicek, O., Limiting Loan Loss Distribution, KMV Corporation, 1991.
9. Vasicek, O., The Distribution of Loan Portfolio Value, Risk, December 2002.