Advanced Search
MyIDEAS: Login to save this paper or follow this series

Enemies or Allies: Pricing counterparty credit risk for synthetic CDO tranches

Contents:

Author Info

  • Lee, Y.
  • So, Leh-chyan

Abstract

This research aims to construct a model for pricing counterparty credit risk (CCR) for synthetic collateralized debt obligation (CDO) tranches by considering the relationship between the counterparty and the credit port- folio. A stochastic intensity model is adopted to describe the default event of the counterparty, and a two-factor Gaussian copula model is applied to account for the relationship between the counterparty and underlying credit portfolio. By analyzing the data of CDX NA IG index tranches, we �nd that the relationship has a signi�cant in uence on the credit value adjust- ment (CVA) for index tranches and, hence, that it should not be ignored when a contract is initiated. In addition, we discover that the in uence has opposite e�ects and asymmetrical magnitude with respect to the protection buyers and protection sellers.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/52371/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52371.

as in new window
Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:pra:mprapa:52371

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: counterparty credit risk; synthetic CDO tranches; CDX NA IG index tranches; Gaussian copula model; credit value adjustment;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Robert A. Jarrow, 2001. "Counterparty Risk and the Pricing of Defaultable Securities," Journal of Finance, American Finance Association, American Finance Association, vol. 56(5), pages 1765-1799, October.
  2. Damiano Brigo & Kyriakos Chourdakis, 2009. "Counterparty Risk For Credit Default Swaps: Impact Of Spread Volatility And Default Correlation," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 12(07), pages 1007-1026.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:52371. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.