Pricing CDO tranches with stochastic correlation and random factor loadings in a mixture copula model

DOI10.1016/J.AMC.2012.09.014MaRDI QIDQ2018976zbMATHOpenAlexFDO

Authors Zhe Chen, Qunfang Bao, Shenghong Li, Jianli Chen

Publication date 26 March 2015

Published in Applied Mathematics and Computation (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.amc.2012.09.014

zbMATH Keywords

stochastic correlationCDO pricingmixture copula modelrandom factor loadings

Mathematics Subject Classification ID

Classification and discrimination; cluster analysis (statistical aspects) (62H30) Derivative securities (option pricing, hedging, etc.) (91G20) Measures of association (correlation, canonical correlation, etc.) (62H20) Applications of statistics to actuarial sciences and financial mathematics (62P05) Credit risk (91G40)

Recommendations

• CDO pricing using single factor \(\mathcal M_{G-\mathcal{NI}G}\) copula model with stochastic correlation and random factor loading
• A CDO pricing model based on the mixture copula
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• Correlation smile matching for collateralized debt obligation tranches with \(\alpha \)-stable distributions and fitted Archimedean copula models
• CDO tranche sensitivities in the Gaussian copula model

Cites work

• CDO pricing using single factor \(\mathcal M_{G-\mathcal{NI}G}\) copula model with stochastic correlation and random factor loading
• Pricing Tranches of a CDO and a CDS Index: Recent Advances and Future Research

Cited in

(10)

• Evaluation of cumulative random shocks generated from a semi-Markov modulated Poisson process and its application to CDO pricing
• CDO pricing using single factor \(\mathcal M_{G-\mathcal{NI}G}\) copula model with stochastic correlation and random factor loading
• CDO tranche sensitivities in the Gaussian copula model
• Pricing a CDO on stochastically correlated underlyings
• Joint distributions of portfolio losses and exotic portfolio products
• Simulation/Regression Pricing Schemes for CVA Computations on CDO Tranches
• A CDO pricing model based on the mixture copula
• Quadratic transform approximation for CDO pricing in multifactor models
• A factor-copula based valuation of synthetic CDO-squared under a stochastic intensity
• Correlation smile matching for collateralized debt obligation tranches with \(\alpha \)-stable distributions and fitted Archimedean copula models

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