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Valuation and Risk Management of Collateralized Debt Obligations and Related Securities

Author

Listed:
  • Christian Bluhm

    (FMS-Wertmanagement (Public Wind-Down Agency), Munich, Germany 80538
    Technical University of Munich, Munich, Germany 80333)

  • Christoph Wagner

    (FMS-Wertmanagement (Public Wind-Down Agency), Munich, Germany 80538
    Ludwig-Maximilians University, Munich, Germany 80539)

Abstract

Over the course of a few decades, asset securitization has evolved into a vast and diverse financial instrument. Bases for the marketability of these securities are valuation and risk management techniques allowing for reasonable pricing formulas and hedging schemes. Therefore, a key issue is the modeling of cash flows of a portfolio of assets as well as the statistical modeling of uncertainties of such cash flows in the future. This article reviews some aspects of so-called collateralized debt obligations (CDOs) and related instruments. The modeling of underlying credit risks plays an important role in this context. As such, this review naturally has a special focus on the modeling of structured credit portfolios.

Suggested Citation

  • Christian Bluhm & Christoph Wagner, 2011. "Valuation and Risk Management of Collateralized Debt Obligations and Related Securities," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 193-222, December.
    • Handle: RePEc:anr:refeco:v:3:y:2011:p:193-222
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-102710-144835
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    Citations

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    Cited by:

    1. Matthias Nadler & Felix Bekemeier & Fabian Schar, 2022. "DeFi Risk Transfer: Towards A Fully Decentralized Insurance Protocol," Papers 2212.10308, arXiv.org.

    More about this item

    Keywords

    securitization; CDO; structural models; intensity models; dependency;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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