Valuation of collateralized debt obligations in a multivariate subordinator model

Yunpeng Sun*, Rafael Mendoza-Arriaga, Vadim Linetsky

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Scopus citations

Abstract

The paper develops valuation of multi-name credit derivatives, such as collateralized debt obligations (CDOs), based on a novel multivariate subordinator model of dependent default (failure) times. The model can account for high degree of dependence among defaults of multiple firms in a credit portfolio and, in particular, exhibits positive probabilities of simultaneous defaults of multiple firms. The paper proposes an efficient simulation algorithm for fast and accurate valuation of CDOs with large number of firms.

Original languageEnglish (US)
Title of host publicationProceedings of the 2011 Winter Simulation Conference, WSC 2011
Pages3742-3754
Number of pages13
DOIs
StatePublished - Dec 1 2011
Event2011 Winter Simulation Conference, WSC 2011 - Phoenix, AZ, United States
Duration: Dec 11 2011Dec 14 2011

Publication series

NameProceedings - Winter Simulation Conference
ISSN (Print)0891-7736

Other

Other2011 Winter Simulation Conference, WSC 2011
CountryUnited States
CityPhoenix, AZ
Period12/11/1112/14/11

ASJC Scopus subject areas

  • Software
  • Modeling and Simulation
  • Computer Science Applications

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