Pricing Collateralized Debt Obligation--By Fitch VECTOR Model

Collateralized debt obligation (CDO) is a financial product for credit risk bearers to transfer their risks to investors who are willing to take credit risks in order to gain higher returns. Just like other securitized products, collateralized debt obligation is created by repacking assets, that is, holding one security is equivalent to holding one share of the asset pool.In this essay, introduction of collateralized debt obligation and the model Fitch uses to measure portfolio credit risks will be the first and the second part. The third part of the assay is the practical credit risk result of the portfolio comprising 32 public companies in Taiwan by Fitch model.