A Top-down Model for Cash CLO
by Yadong Li of Barclays Capital, and
April 19, 2010
Abstract: We propose a top-down model for cash CLO. This model can consistently price cash CLO tranches both within the same deal and across different deals. Meaningful risk measures for cash CLO tranches can also be defined and computed. This method is self-consistent, easy to implement and computationally efficient. It has the potential to bring much pricing transparency to the cash CLO markets; and it could also greatly improve the risk management of cash instruments.
Keywords: CLO, Top-down.