Refinement on Poisson approximation of CDOs
نویسندگان
چکیده
منابع مشابه
Gauss and Poisson Approximation: Applications to CDOs Tranche Pricing
This article describes a new numerical method, based on Stein’s method and zero bias transformation, to compute CDO tranche prices. We propose first order correction terms for both Gauss and Poisson approximations and the approximation errors are discussed. We then combine the two approximations to price CDOs tranches in the conditionally independent framework using a realistic local correlatio...
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A critical issue in the credit risk industry is the accurate, efficient and robust pricing of collateralized debt obligations (CDO) in a variety of mathematical models. These and many similar basket default products are very complex, due to characteristics of the large number of individual firms upon which they depend. Despite this complexity and because of their versatility, such products have...
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i=1 pi ≤ max 1≤i≤n pi, (6.1) where λ := EW = ∑n i=1 pi. Clearly, if the pi’s are not all small, there may be little content in (6.1). This is to be expected, since then EW = λ and VarW = λ − ∑n i=1 p 2 i need no longer be close to one another, whereas Poisson distributions have equal mean and variance. This makes it more natural to try to find a family of distributions for the approximation wit...
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ژورنال
عنوان ژورنال: ScienceAsia
سال: 2021
ISSN: 1513-1874
DOI: 10.2306/scienceasia1513-1874.2021.041