In English

Cash-Flow CDO Pricing with Amortization

Hans Brandt
Göteborg : Chalmers tekniska högskola, 2015. 40 s.
[Examensarbete på avancerad nivå]

In this paper we propose a simple general setting for pri ing CDOs with amortization. The model is not intended to pri e market CDO produ ts but rather to study the joint impa t of amortization and default risk on a hypotheti al tran he spread. In our pri ing model the mortgage loans are allowed to amortize but not prepay and the amortization is allo ated "pro- rate" to the tran hes. Due to the omplexity of nding a losed form solution for su h a CDO stru ture we are using Monte Carlo simulations. Sin e default dependen y highly ae ts the loss distribution and therefore also the CDO spreads, the default times of the mortgage loans are al ulated using three dierent redit risk models, ea h imposing a dierent dependen y stru ture. Finally, the tran he spread sensitivity is analyzed with respe t to the input param- eters.

Nyckelord: CDOs, Amortization, Default Dependen y, Homogenous Poisson Process, CIR,

Publikationen registrerades 2015-03-27.

CPL ID: 214408

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