The Pricing and Hedging of Spot and Forward-Starting Collateralized Debt Obligations－via Default Contagion

• Main Authors: Ming-Shun Kao, 高銘舜
• Other Authors: Hsiang-Hui Chu
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/12085876859275536071

碩士 === 國立暨南國際大學 === 財務金融學系 === 98 === In this paper we investigate the valuation and hedging issues of spot and forward-starting collateral debt obligations（CDOs） under the conditional independence assumption and default contagion effect. We use the factor model that describes the firm value by Laurent and Gregory. We also apply the probability bucketing method of Hull and White（2004） to construct the reference pool loss distribution. No matter what the spot and forward-starting CDO, the tranche credit spread is consistently increasing when the contagion effect is more powerful. Moreover, we use the risk measures that are adequate for assessing the relative risk of tranches from the numerical results, and find the expected and unexpected loss ratio are increasing when the contagion effect is more powerful. Finally the calculation of the hedging parameters is implemented, and we provide results for investors. The difference between the spot and forward-starting CDO is forward-starting CDO can expect the future to gain benefit. Therefore, the forward-starting CDO is more flexible than the spot-starting CDO in hedge, and it has a good grace for investors.