Dynamic Model of Option on Forward CDO Tranches
Date Issued
2009
Date
2009
Author(s)
Ko, Cheng-Hsiu
Abstract
In this thesis, we present a dynamic model to calibrate the market quote of credit default swap spread, on the contrary to the traditional static Gaussian Copula model. In this dynamic model, the default intensity is affected by two factors: the first is the deterministic drift term, which increases over time; the other one is the Impulse term. We take two forms of impulse terms, which are exponential jump and linear jump. The jump size is a measure of default correlation as is the correlation matrix in the Gaussian Copula Function.e then calculate the prices of forward start CDO tranches. We compare the results of Poisson process with exponential jump and linear jump respectively, and observe the trend of price movement since the emergence of global financial crisis after mid 2008. Then we analyze the characteristics of forward start CDO tranches in terms of different maturity dates and different seniorities.ased on the Hull and White (2008) model, we calculate the prices of option on forward CDO tranches, and derive the implied volatility for each tranche based on the Black type formula.
Subjects
Dynamic Model
Credit Default Swap
Forward CDO tranches
Option on CDO tranches
Implied Volatility
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-98-R96723024-1.pdf
Size
23.32 KB
Format
Adobe PDF
Checksum
(MD5):d72fe82ca716db9ebc0a73ed9a4ec34c