Default Risk Probability of Collateralized Debt Obligation
Date Issued
2006
Date
2006
Author(s)
Lu, Chien-Wei
DOI
zh-TW
Abstract
Asset Securitization was formed at 1970. The enterprises and financial institutions group assets which can bring cash flow, and then issue securities to investors in the market. Collateralized Debt Obligation is a credit risk product backed by a pool of debt obligation. They create securities or classes of securities from a portfolio of debt instruments. When the underlying assets are bonds, the CDO is referred to as a collateralized bond obligation, CBO. When the underlying assets are loans, the CDO is referred to as a collateralized loan obligation, CLO. The assets in CDO come from different industries and credit levels. As a result, we have to capture real characteristics of assets to measure risk accurately. That includes individual default rate, recovery rate and default correlations between assets. There are many methods to evaluate Collateralized Debt Obligation in the market, for example, Moody’s Binomial Expansion Technique, Infectious model, Copula method, etc. The article focuses mainly on the lack of Binomial Expansion Technique and Infectious Model and makes use of Poisson model with common shocks by Cossette and Marceau[2000].We bring assets correlations and time factors to the model. Finally, we analyze the default probabilities of assets under different credit level and time factors
Subjects
資產證券化
抵押債權憑證
Asset Securitization
Collateralized Debt Obligation
Type
thesis
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