the web's biggest credit risk modeling resource.

Credit Jobs

Home Glossary Links FAQ / About Site Guide Search


Submit Your Paper

In Rememberance: World Trade Center (WTC)

doi> search: A or B

Export citation to:
- Text (plain)
- BibTeX

CDOs in Chains

by Johan de Kock of Fraunhofer ITWM,
Holger Kraft of the University of Kaiserslautern, and
Mogens Steffensen of the University of Copenhagen

January 24, 2007

Abstract: This paper discusses the pricing of CDOs in a Markov chains framework. We show that in general the values of the legs satisfy systems of partial differential equations. In the special case of constant default intensities, one only needs to solve a system of ordinary differential equations, the so-called Kolmogorov differential equations.

JEL Classification: G13, G33.

Keywords: Markov chains, credit risk, credit derivatives, contagion.

Books Referenced in this paper:  (what is this?)

Download paper (144K PDF) 9 pages