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| Hedging and Asset Allocation for Structured Products by Robert Lamb of Imperial College, December 2005 Abstract: This paper presents techniques for hedging structured products in incomplete markets. Under actual distributions, we simulate correlated ratings histories for pool exposures up to the hedging horizon and then employ conditional pricing functions estimated from a preliminary Monte Carlo based on risk adjusted distributions. The approach is very flexible. We apply it to a realistic multi-period CDO transaction. JEL Classification: D82, G13, C73. Keywords: Structured Products, Hedging, Pricing, Regression, Conditional Pricing Functions. Books Referenced in this Paper: (what is this?)
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