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Exact Pricing Asymptotics for Investment-Grade Tranches of Synthetic CDO's. Part II: A Large Heterogeneous Pool


  • Richard B. Sowers


We use the theory of large deviations to study the pricing of investment-grade tranches of synthetic CDO's. In this paper, we consider a heterogeneous pool of names. Our main tool is a large-deviations analysis which allows us to precisely study the behavior of a large amount of idiosyncratic randomness. Our calculations allow a fairly general treatment of correlation.

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  • Richard B. Sowers, 2009. "Exact Pricing Asymptotics for Investment-Grade Tranches of Synthetic CDO's. Part II: A Large Heterogeneous Pool," Papers 0903.4478,
  • Handle: RePEc:arx:papers:0903.4478

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