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| Levy Process Dynamic Modelling of Single-Name Credits and CDO Tranches by Martin Baxter of Nomura International, plc April 27, 2006 Abstract: This paper explores further a new family of structural credit models using Levy processes, particularly the Gamma process and some variants. These dynamic arbitrage-free models can fit both CDS and CDO markets. Building on the Brownian-Variance-Gamma of the earlier paper (20 March 2006), more models from the family are introduced and compared. Goodness of fit, parameter stability, and practicality of implementation are considered, using a six month dataset of market levels to test calibration. Keywords: Structural credit model, CDO pricing, Levy process. Books Referenced in this paper: (what is this?)
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