Una Contribución a la Valuación de los Synthetic CDO
AbstractThe Credit Default Swap (CDS) is the most popular credit derivative and it is used as an insurance against the risk of default by a particular company, known as a reference entity. If a portfolio of debt instruments is created with a complex structure where the cash flows from such portfolio are channeled to different categories of investors, we have a collateralized debt obligation (CDO). If the CDO is formed by a portfolio of CDS it is called a Synthetic CDO. The synthetic CDO transfers to market the credit risk of the portfolio. In this paper I describe the synthetic CDO valuation process and I propose an algorithm in order to get the fair price of tranches that do not require Monte Carlo simulation or Copulas, even with different notional principal values.
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Bibliographic InfoArticle provided by Tecnológico de Monterrey, Campus Ciudad de México in its journal Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics).
Volume (Year): 3 (2009)
Issue (Month): 2 ()
Derivados de crédito; riesgo de crédito; collateralized debt obligation.;
Find related papers by JEL classification:
- C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Black, Fischer & Cox, John C, 1976. "Valuing Corporate Securities: Some Effects of Bond Indenture Provisions," Journal of Finance, American Finance Association, vol. 31(2), pages 351-67, May.
- Michael S. Gibson, 2004. "Understanding the risk of synthetic CDOs," Finance and Economics Discussion Series 2004-36, Board of Governors of the Federal Reserve System (U.S.).
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