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Exact Pricing Asymptotics of Investment-Grade Tranches of Synthetic CDO's Part I: A Large Homogeneous Pool

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  • Richard B. Sowers

Abstract

We use the theory of large deviations to study the pricing of investment-grade tranches of synthetic CDO's. In this paper, we consider a simplified model which will allow us to introduce some of the concepts and calculations.

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  • Richard B. Sowers, 2009. "Exact Pricing Asymptotics of Investment-Grade Tranches of Synthetic CDO's Part I: A Large Homogeneous Pool," Papers 0903.4475, arXiv.org.
    • Handle: RePEc:arx:papers:0903.4475
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    1. Amir Dembo & Jean-Dominique Deuschel & Darrell Duffie, 2004. "Large portfolio losses," Finance and Stochastics, Springer, vol. 8(1), pages 3-16, January.
    2. Didier Sornette, 1998. "Large deviations and portfolio optimization," Papers cond-mat/9802059, arXiv.org, revised Jun 1998.
    3. Sornette, Didier, 1998. "Large deviations and portfolio optimization," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 256(1), pages 251-283.
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    Cited by:

    1. Konstantinos Spiliopoulos & Richard B. Sowers, 2010. "Recovery Rates in investment-grade pools of credit assets: A large deviations analysis," Papers 1006.2711, arXiv.org, revised Aug 2011.

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