Structural jump-diffusion model for pricing collateralized debt obligations tranches |
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Authors: | Rui-cheng Yang |
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Affiliation: | School of Mathematics and Information, Ludong University, Yantai 264025, China |
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Abstract: | This paper considers the pricing problem of collateralized debt obligations tranches under a structural jump-diffusion model, where the asset value of each reference entity is generated by a geometric Brownian motion and jump with an asymmetric double exponential distribution. Conditioned on the common factor of individual entity, this paper gets the conditional distribution, and further obtains the loss distribution of the whole reference portfolio. Based on the semi-analytic approach, the fair spreads of collateralized debt obligations tranches, i.e., the prices of collateralized debt obligations tranches, are derived. |
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Keywords: | Structural jump-ditlusion model Brownian motion asymmetric double exponential distribution collateralized debt obligations loss distribution |
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