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Exact Pricing Asymptotics for Investment-Grade Tranches of Synthetic CDO's. Part II: A Large Heterogeneous 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 heterogeneous pool of names. Our main tool is a large-deviations analysis which allows us to precisely study the behavior of a large amount of idiosyncratic randomness. Our calculations allow a fairly general treatment of correlation.

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  • Richard B. Sowers, 2009. "Exact Pricing Asymptotics for Investment-Grade Tranches of Synthetic CDO's. Part II: A Large Heterogeneous Pool," Papers 0903.4478, arXiv.org.
    • Handle: RePEc:arx:papers:0903.4478
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    File URL: http://arxiv.org/pdf/0903.4478
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    1. Schwab, Andrew & Raup, Philip M., 1988. "The Minnesota Rural Real Estate Market In 1987... With An Analysis Of Three Decades Of Land Price Changes," Economic Reports 13085, University of Minnesota, Department of Applied Economics.
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