Fine-tuning the equivalent strike framework for bespoke cdo tranches pricing

Moez Mrad and Racem Triki

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a fine-tuning of some mapping functions used in the Equivalent Strike framework. This new approach provides an equivalent strike that is independent from the index base correlation. This feature is valuable when pricing very junior and senior tranches or when computing index tranches (or index base correlation) sensitivities. Our numerical tests on realistic cases showed that the equivalent correlation provided by this new is pretty close to what is computed with common mapping functions.

Keywords: Bespoke CDO pricing; Equivalent Strike framework; Index base correlation extrapolation; index tranche sensitivities (search for similar items in EconPapers)
JEL-codes: C00 C61 C63 (search for similar items in EconPapers)
Date: 2011-03-30
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/30750/1/MPRA_paper_30750.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:30750

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().