Affiliation:
1. Lehman Brothers, 25 Bank Street, London E14 5LE, United Kingdom
Abstract
The pricing of exotic portfolio products, e.g. path-dependent CDO tranches, relies on the joint probability distribution of portfolio losses at different time horizons. We discuss a range of methods to construct the joint distribution in a way that is consistent with market prices of vanilla CDO tranches. As an example, we show how our loss-linking methods provide estimates for the breakeven spreads of forward-starting tranches. .
Publisher
World Scientific Pub Co Pte Lt
Subject
General Economics, Econometrics and Finance,Finance
Cited by
6 articles.
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