Applying Copula to simulate default time and Loss Amount to study CDO yield and default Risk by spread discount approach

• Main Authors: Yu-Ping Huang, 黃宇平
• Other Authors: En-der Su
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/rwsw3j

碩士 === 國立高雄第一科技大學 === 風險管理與保險所 === 96 === The main purpose of this research is to analyze how correlation and recovery rate influence the collateralized debt obligation (CDO) by evaluating the risk of CDO. We adopt Laurent and Gregory’s mechanism of spread analysis to perform Monte Carlo simulation, and then test the tranche structure and price risk of CDO under different correlation and recovery rate. The results show a positive relation between correlation and credit spread, where as the relation between recovery rate and credit spread is negative. However, it is worthy to notice that those relations are changeable, even totally converse while studying on junior tranches. The problems result from not only the cases of without any loss in the simulation process, but also the centralized distribution of loss due to recovery rate rise. Because there are not an authorized evaluation model of CDO and not many detailed analysis about tranche structure, we strongly believe that this study provides a practical model for industries and administrations to evaluate the issuance and supervise CDO related product.