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Please use this identifier to cite or link to this item: http://hdl.handle.net/10400.5/2256

Title: On the Pricing of CDOs
Authors: Gaspar, Raquel M.
Schmidt, Thorsten
Issue Date: 2007
Publisher: ISEG – Departamento de Gestão
Citation: Gaspar, Raquel M. e Thorsten Schmidt. 2007. "On the Pricing of CDOs". Instituto Superior de Economia e Gestão – Departamento de Gestão Working papers series nº 4-2007
Series/Report no.: Working papers series;nº 4-2007
Abstract: This chapter addresses the pricing of two popular portfolio credit derivatives: first-to-default swaps and collateralized debt obligations (CDOs). We use the recent model of Gaspar and Schmidt (2007) for the pricing of theses portfolio credit derivatives. This approach combines general quadratic models for term structures with shot-noise models and therefore naturally solves a number of important issues in credit portfolio risk. First, resulting pricing formulas are in closed form and therefore the model implementation is straightforward. Second, this class of models is able to incorporate well-known features of credit risky markets: realistic default correlations, default clustering and correlation between short-rate and credit spreads. Third, the recent turbulence in credit spreads caused by the U.S. subprime mortgage turmoil can be captured well.
Description: This work as been published as a book chapter. Due to restrictions imposed by the Editor, it is no longer available for download as a working paper. Recommended citation is: • Gaspar, R.M. and T. Schmidt (2008), "On the Pricing of CDOs", in Credit Derivatives (Edited by P.U. Ali and G. Gregouriou), Chapter 11, McGraw-Hill.
URI: http://hdl.handle.net/10400.5/2256
ISSN: 0874-8470
Publisher version: http://www.iseg.utl.pt/departamentos/gestao/wp/N4_2007.pdf
Appears in Collections:DG - Documentos de trabalho / Working Papers

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