DocumentCode
3315897
Title
Mixed Copula Model with Random Recovery Rate for CDO Pricing
Author
Chen, Jianli ; Liu, Wenqiong ; Li, Shenghong
Author_Institution
Dept. of Math., Zhejiang Univ., Hangzhou, China
fYear
2012
fDate
17-19 Aug. 2012
Firstpage
507
Lastpage
510
Abstract
This paper presents a new factor copula model for pricing CDO tranches, where the involved distributions are mixtures of Gaussian distribution and VG distribution. Besides, random recovery rate is introduced into the mixed copula framework to effectively model "correlation smile" in CDO pricing. Numerical analysis shows that the new model may better simulate the loss distribution of the reference assets pool and the fairy credit spread of the CDO tranche.
Keywords
Gaussian distribution; asset management; numerical analysis; pricing; random processes; CDO tranche pricing; Gaussian distribution; VG distribution; correlation smile model; credit derivatives markets; factor copula model; fairy credit spread; mixed copula model; numerical analysis; random recovery rate; reference assets pool; Computational modeling; Correlation; Gaussian distribution; Mathematical model; Numerical models; Portfolios; Pricing; CDO; G-VG copula model; correlation smile; random recovery rate;
fLanguage
English
Publisher
ieee
Conference_Titel
Computational and Information Sciences (ICCIS), 2012 Fourth International Conference on
Conference_Location
Chongqing
Print_ISBN
978-1-4673-2406-9
Type
conf
DOI
10.1109/ICCIS.2012.182
Filename
6300555
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