Chaptergreen2007

A Generic One-Factor Lévy Model for Pricing Synthetic CDOs

Hansjörg Albrecher · Sophie A. Ladoucette · Wim Schoutens

70 citations0/0 files storedApplied and numerical harmonic analysis

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Stochastic processes and financial applications Financial Risk and Volatility Modeling Credit Risk and Financial Regulations

Abstract

The one-factor Gaussian model is well known not to fit the prices of the different tranches of a collateralized debt obligation (CDO) simultaneously, leading to the implied correlation smile. Recently, other one-factor models based on different distributions have been proposed. Moosbrucker [12] used a one-factor Variance-Gamma (VG) model, Kalemanova et al. [7] and Guégan and Houdain [6] worked with a normal inverse Gaussian (NIG) factor model, and Baxter [3] introduced the Brownian Variance-Gamma (BVG) model. These models bring more flexibility into the dependence structure and allow tail dependence. We unify these approaches, describe a generic one-factor Lévy model, and work out the large homogeneous portfolio (LHP) approximation. Then we discuss several examples and calibrate a battery of models to market data.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 70 citations exist upstream.

References

1998The Variance Gamma Process and Option Pricing 1990The Variance Gamma (V.G.) Model for Share Market Returns 1997Normal Inverse Gaussian Distributions and Stochastic Volatility Modelling 2003Lévy processes in finance pricing financial derivatives 2003Lévy Processes in Finance 1991Option Pricing With V. G. Martingale Components1 1997The normal inverse gaussian lévy process: simulation and approximation 2007The Normal Inverse Gaussian Distribution for Synthetic CDO Pricing

Cited by

2011Generalized beta regression models for random loss-given-default 2009Lévy base correlation 2009Single and joint default in a structural model with purely discontinuous asset prices 2012-extendible copulas 2006Portfolio losses in factor models: term structures and intertemporal loss dependence 2014A framework for robust measurement of implied correlation

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.