Risk and Valuation of Collateralized Debt Obligations

by Darrell Duffie of Stanford University, and
Nicolae Gârleanu of Stanford University

September 23, 2001

Abstract:  This paper addresses the risk analysis and market valuation of collateralized debt obligations (CDOs). We illustrate the effects of correlation and prioritization for the market valuation, diversity score, and risk of CDOs, in a simple jump-diffusion setting for correlated default intensities.

Published in: Financial Analysts Journal, Vol. 57, No. 1, (January/February 2001), pp. 41-59.

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