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Areski COUSIN and Jean-Paul LAURENT Comparison results for exchangeable credit risk portfolios Comparison results Application to several popular CDO pricing models Conclusion De Finetti theorem and factor representation Stochastic orders Main results Contents 1 Comparison results De Finetti theorem and factor representation Stochastic orders Main results 2… (More)
Il s'agit d'une version concise de l'article " hedging default risks of CDOs in Markovian contation models " (2008) auquel nous renvoyons pour plus de dtails. Nous mettons enévidence une stratégie de duplication de tranches de CDO faisant appel au contrat de swap de défaut sur l'indice sous-jacent. La perte agrégée suit une chaˆıne de Markov. L'intensité de… (More)
We consider a bottom-up Markovian copula model of portfolio credit risk where dependence among credit names mainly stems from the possibility of simultaneous defaults. Due to the Markovian copula nature of the model, calibration of marginals and dependence parameters can be performed separately using a two-steps procedure, much like in a standard static… (More)
In this paper, we introduce two alternative extensions of the classical univariate Value-at-Risk (VaR) in a multivariate setting. The two proposed multivariate VaR are vector-valued measures with the same dimension as the underlying risk portfolio. The lower-orthant VaR is constructed from level sets of multivariate distribution functions whereas the… (More)
While the Gaussian copula model is commonly used as a static quotation device for CDO tranches, its use for hedging is questionable. In particular, the spread delta computed from the Gaussian copula model assumes constant base correlations, whereas we show that the correlations are dynamic and correlated to the index spread. It might therefore be expected… (More)
Service) collaborative project for which we are very grateful. The authors also thank Marek Rutkowski for useful discussions and comments.
We review the pricing of synthetic CDO tranches from the point of view of factor models. Thanks to the factor framework, we can handle a wide range of well-know pricing models. This includes pricing approaches based on copulas, but also structural, multivariate Poisson and affine intensity models. Factor models have become increasingly popular since there… (More)