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.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
1668.
References listed on IDEAS 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.:
Andrew Friend & Ebbe Rogge, 2005.
"Correlation at First Sight,"
Economic Notes,
Banca Monte dei Paschi di Siena SpA, vol. 34(2), pages 155-183, 07.
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