EXACT PRICING ASYMPTOTICS OF INVESTMENT-GRADE TRANCHES OF SYNTHETIC CDO'S: A LARGE HOMOGENEOUS POOL

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 simplified model which will allow us to introduce some of the concepts and calculations.

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Bibliographic Details
Published in:International journal of theoretical and applied finance 2010-05, Vol.13 (3), p.367-401
Main Author: SOWERS, RICHARD B.
Format: Article
Language:English
Subjects:
Applied economics
Asymptotic methods
Collateralized debt obligations
Financial analysis
Forecasting techniques
Investment strategies
Mathematical models
Price models
Pricing
Stock prices
Studies
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Description
Summary: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 simplified model which will allow us to introduce some of the concepts and calculations.
ISSN:0219-0249
1793-6322
DOI:10.1142/S0219024910005814