NOTES ON EXACT AND SEMI-EXACT LÉVY MODELS FOR THE VALUATION OF CDOs
We investigate the effects of certain simplifying assumptions that are often made when valuating tranches of collateralized debt obligations (CDOs) using a firm's value approach. Those assumptions are the homogeneity and largeness of the portfolio and the so-called European approximation. The error made in this way is measured by comparing the result to a model with less simplification which is evaluated by the use of Monte Carlo simulation.
Volume (Year): 13 (2010)
Issue (Month): 06 ()
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