Dynamic hedging of synthetic CDO tranches with spread risk and default contagion

DOI10.1016/J.JEDC.2009.10.013zbMath1202.91337OpenAlexW2096306954MaRDI QIDQ964581

Jochen Backhaus, Rüdiger Frey

Publication date: 22 April 2010

Published in: Journal of Economic Dynamics \& Control (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.jedc.2009.10.013

zbMATH Keywords

incomplete marketscredit derivativesdynamic hedgingportfolio credit riskdefault contagion

Mathematics Subject Classification ID

Applications of Markov chains and discrete-time Markov processes on general state spaces (social mobility, learning theory, industrial processes, etc.) (60J20) Derivative securities (option pricing, hedging, etc.) (91G20) Credit risk (91G40)

Related Items (13)

From insurance risk to credit portfolio management: a new approach to pricing CDOs ⋮ A Multivariate Default Model with Spread and Event Risk ⋮ Locally risk-minimizing hedging of counterparty risk for portfolio of credit derivatives ⋮ The law of large numbers for self-exciting correlated defaults ⋮ Pricing credit derivatives under incomplete information: a nonlinear-filtering approach ⋮ HEDGING OF SYNTHETIC CDO TRANCHES WITH SPREAD AND DEFAULT RISK BASED ON A COMBINED FORECASTING APPROACH ⋮ Hedging default risks of CDO tranches in non-homogeneous Markovian contagion models ⋮ Pricing and hedging of credit derivatives via the innovations approach to nonlinear filtering ⋮ An extension of Davis and Lo's contagion model ⋮ On break-even correlation: the way to price structured credit derivatives by replication ⋮ Large portfolio losses: A dynamic contagion model ⋮ The static hedging of CDO tranche correlation risk ⋮ A set-valued Markov chain approach to credit default

Cites Work

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• BSLP: Markovian bivariate spread-loss model for portfolio credit derivatives
• Robustness of the Black and Scholes Formula
• RECOVERING PORTFOLIO DEFAULT INTENSITIES IMPLIED BY CDO QUOTES

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