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In Rememberance: World Trade Center (WTC)

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The Discrete Gamma Pool Model

by Peter Jäckel of OTC Analytics

November 16, 2008

Abstract: We propose a model for the dynamics of losses and spreads on portfolios for the purpose of pricing exotic variations of synthetic collateralised tranche obligations such as Loss Triggered Leveraged Super-Senior notes, multi-callable CDOs, and, by implication of the latter, options on forward starting CDOs. Also, we discuss how features such as the counterparty's right to deleverage upon a loss trigger event in a leveraged super senior can be understood as an embedded Bermudan swaption, and how this can be catered for in a numerical implementation.

Published in: Wilmott Journal, Vol. 1, No. 1, (February 2009), pp. 23-40.

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