Hedging and Asset Allocation for Structured Products

DefaultRisk.com the web's biggest credit risk modeling resource.

Submit Your Paper

Fitch Ratings Jobs

[ Worldwide]

Post Your Résumé
For Recruiters

Featured Book

Interest Rate Models -- Theory and Practice: With Smile, Inflation and Credit, 2^nd Edition
by Damiano Brigo and Fabio Mercurio, Springer, (May 19, 2006), Hardcover, 981 pages

Training Discounted for DefaultRisk.com visitors only:

The Mathematics of Credit Derivatives: The Essential Credit Modelling and Pricing Companion
by Philipp J. Schönbucher,
WBS Training, August 2003, DVD / Interactive CD-ROM

Sponsor:
Shop at Amazon.com and support DefaultRisk.com

Hedging and Asset Allocation for Structured Products

by Robert Lamb of Imperial College,
Vladislav Peretyatkin of Imperial College, and
William Perraudin 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?)