IDEAS home Printed from https://ideas.repec.org/p/cte/wbrepe/wb073909.html
   My bibliography  Save this paper

Pricing tranched credit products with generalized multifactor models

Author

Listed:
  • Moreno, M.
  • Serrano, P.

Abstract

The market for tranched credit products (CDOs, Itraxx tranches) is one of the fastest growing segments in the credit derivatives industry. However, some assumptions underlying the standard Gaussian onefactor pricing model (homogeneity, single factor, Normality), which is the pricing standard widely used in the industry, are probably too restrictive. In this paper we generalize the standard model by means of a two by two model (two factors and two asset classes). We assume two driving factors (business cycle and industry) with independent tStudent distributions, respectively, and we allow the model to distinguish among portfolio assets classes. In order to illustrate the estimation of the parameters of the model, an empirical application with Moody's data is also included.

Suggested Citation

  • Moreno, M. & Serrano, P., 2007. "Pricing tranched credit products with generalized multifactor models," DEE - Working Papers. Business Economics. WB wb073909, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    • Handle: RePEc:cte:wbrepe:wb073909
    as

    Download full text from publisher

    File URL: https://e-archivo.uc3m.es/rest/api/core/bitstreams/f3d6ef22-2215-48d6-aa75-39e7ae95396e/content
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Collateral debt obligations;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cte:wbrepe:wb073909. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ana Poveda (email available below). General contact details of provider: http://www.business.uc3m.es/es/index .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.