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Wednesday, July 29, 2020 | History

3 edition of An empirical analysis of the pricing of collateralized debt obligations found in the catalog.

An empirical analysis of the pricing of collateralized debt obligations

Francis A. Longstaff

An empirical analysis of the pricing of collateralized debt obligations

by Francis A. Longstaff

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  • 15 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English


Edition Notes

StatementFrancis A. Longstaff, Arvind Rajan.
SeriesNBER working paper series -- working paper 12210, Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12210.
ContributionsRajan, Arvind, National Bureau of Economic Research.
Classifications
LC ClassificationsHB1
The Physical Object
FormatElectronic resource
ID Numbers
Open LibraryOL23162443M
LC Control Number2006619054

Written in a very practical way, the technical contents of the book should not be too difficult to follow for a reader with intermediate quantitative skills.' An Empirical Analysis of the Pricing of Collateralised Debt Obligations, , April Written in a clear and accessible style, this book is a valuable guide that provides you with critical insights into many areas of this important market sector. Collateralized Debt Obligations defines and describes many of the current products in the CDO arena-cash flow CDOs, market value CDOs, /5(4).

Modelling portfolio credit risk is one of the crucial challenges faced by financial services industry in the last few years. We propose the valuation model of collateralized debt obligations (CDO) based on hierarchical Archimedean copulae (HAC) with up to three parameters, with default intensities calibrated to market data and with random loss given defaults that are correlated with default by: Since first editions publication, the CDO market has seen tremendous growth. As of , $ trillion of CDOs were outstanding -- making them the fastest-growing investment vehicle of the last decade. To help you keep up with this expanding market and its various instruments, Douglas Lucas, Laurie Goodman, and Frank Fabozzi have collaborated to bring you this fully revised and up-to-date new.

Risk and Valuation of Collateralized Debt Obligations weakest link in the chain of CDO analysis is the availability of empirical data that would bear on the correlation, actual or risk-neutral, of default. The balance-sheet CDO, typically in the form of a collateralized loan obligation (CLO), 3. We compare the performance of various hedging strategies for index collateralized debt obligation (CDO) tranches across a variety of models and hedging methods during the recent credit crisis. Our empirical analysis shows evidence for market incompleteness: a large proportion of risk in the CDO tranches appears to be unhedgeable. We also show that, unlike what is commonly assumed, dynamic Cited by:


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An empirical analysis of the pricing of collateralized debt obligations by Francis A. Longstaff Download PDF EPUB FB2

An Empirical Analysis of the Pricing of Collateralized Debt Obligations. FRANCIS A. LONGSTAFF. Search for more papers by this author. virtually all of the time‐series and cross‐sectional variation in an extensive data set of CDX index tranche prices.

Tranches are priced as if losses of %, 6%, and 35% of the portfolio occur with Cited by: A collateralized debt obligation (CDO) is a financial claim to the cash flows generated by a portfolio of debt securities or, equivalently, a basket of credit default swaps (CDS contracts).

Thus, CDOs are the credit market counterparts to the familiar collateralized mortgage obligations (CMOs) actively traded in secondary mortgage markets. NBER Program(s):Asset Pricing We study the pricing of collateralized debt obligations (CDOs) using an extensive new data set for the actively-traded CDX credit index and its tranches.

We find that a three-factor portfolio credit model allowing for firm-specific, industry, and economywide default events explains virtually all of the time-series and crosssectional variation in CDX index tranche prices.

Discussion of “An empirical analysis of the pricing of collateralized Debt obligation” by Francis Longstaff and Arvind Rajan Pierre Collin-Dufresne GSAM and UC Berkeley NBER - July Pierre Collin-Dufresne GSAM and UC Berkeley. An Empirical Analysis of the Pricing of Collateralized Debt Obligations.

We use the information in collateralized debt obligations (CDO) prices to study market. An Empirical Analysis of the Pricing of Collateralized Debt Obligations. Francis Longstaff, UCLA Arvind Rajan, Citigroup.

Introduction. • CDOs are financial claims to the cash flows generated by a portfolio of debt securities (or equivalently, a basket of CDS contracts). An Empirical Analysis of the Pricing of Collateralized Debt Obligations () Cached.

Download Links [] An Empirical Analysis of the Pricing of Collateralized Debt Obligations}, year = {}} Share. OpenURL. Abstract. Kraft for valuable comments and suggestions. We also thank Guarav Bansal and Yuzhao Zhang for research.

AN EMPIRICAL ANALYSIS OF THE PRICING OF COLLATERALIZED DEBT OBLIGATIONS Francis A. Longstaff∗ Arvind Rajan∗∗ Abstract.

We use the information in collateralized debt obligation (CDO) prices to study market expectations about how corporate defaults cluster or are correlated across firms. In its most basic form, a collateralized debt obligation (CDO) is simply a financial claim to the cash flows generated by a portfolio of debt securities or, equivalently, a basket of credit default swaps (CDS contracts).Cited by: An empirical analysis of the pricing of collateralized debt obligations Francis Longstaff (UCLA) We use the information in collateralized debt obligation (CDO) prices to study market expectations about how corporate defaults cluster or are correlated across firms.

We study the pricing of collateralized debt obligations (CDOs) using an extensive new data set for the actively-traded CDX credit index and its tranches.

We find that a three-factor portfolio credit model allowing for firm-specific, industry, and economywide default events explains virtually all of the time-series and crosssectional variation in CDX index tranche prices.

An Empirical Analysis of the Pricing of CDOs • Longstaff and Rajan () • Build a model of CDX prices and estimate it for a three-factor model – October to October • Suggest the three factors can be approximately interpreted as – Firm-specific default risk:.

Collateralized Debt Obligations: Structuring, Pricing and Risk Analysis Mark Davis Imperial College London DEFAULT ANALYSIS Basic analysis assumes x% default per year High Leverage Low leverage Princ Protected.

Moody’s Cumulative Default Probabilities These are empirical estimates based on a ‘cohort’ analysis 0% 5% 10% 15% 20% 25%. A CDO is an asset- backed security whose payment depends on the collateral portfolio.

There are different types of CDOs. A CDO whose collateral is made up of cash assets such as corporate bonds or loans is called cash CDO, while a CDO whose collateral is made up of credit default swaps is called a synthetic CDO. This paper studies the pricing of collateralized debt obligation (CDO) using Monte Carlo and analytic methods.

Both methods are developed within the framework of the reduced form model. One-factor Gaussian Copula is used for treating default correlations amongst the collateral portfolio. Based on the two methods, the portfolio loss, the expected loss in each CDO tranche, tranche spread, and Cited by: 3.

"An Empirical Analysis of the Pricing of Collateralized Debt Obligations," NBER Working PapersNational Bureau of Economic Research, Inc. Bates, David S, " Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options," Review of Financial Studies, Society for Financial Studies, vol.

9(1), pages Author: May Hu, Jason Park. Morkötter and Westerfield () find rating patterns in a sample of international collateralized debt obligation issues (CDO) between August and December These are consistent with the. We find that credit rating is the most important variable in determining tranche spread at issue on Collateralized Debt Obligations (CDOs) issues backed by project finance (PF) loans.

Factors that are important for pricing in the case of corporate bonds, such as market liquidity and weighted average maturity, are also relevant for determining Cited by: However, if CDSs on di erent single names are pooled together in.

a portfolio, prices of securities on that portfolio, e.g. collateralized debt obligation (CDO) tranches, reveal that not only single defaults are priced in the CDS pool, but correlated. defaults are as by: 3. Downloadable (with restrictions).

We analyze whether information asymmetry between issuers and investors leads to rating model arbitrage in Collateralized Debt Obligation markets. Rating model arbitrage is defined as the issuer's deliberate capitalization of information asymmetry at the investor's cost on the basis of different rating processes.

A collateralized debt obligation (CDO) is an asset-backed security (e.g. corporate bonds, mortgage-backed securities, bank loans). zThe funds to purchase the underlying assets (called collateral assets) are obtained from the issuance of debt obligations (also referred as tranches).Longstaff, F.

A. & Rajan, A. (), An Empirical Analysis of the Pricing of Collateralized Debt obligations, The journal of finance, 63(2), Crisis Inquiry report (), Final report pf the national commission on the causes of the financial and economic crisis in the united states.Collateralized debt obligations, which are securities with payoffs that are tied to the cash flows in a portfolio of defaultable assets such as corporate bonds, play a significant role in the financial crisis that has spread throughout the : GieseckeKay, KimBaeho.