Notes on exact and semi-exact LÚvy models for the valuation of CDOs
Sprache des Titels:
We investigate the effects of certain simplifying assumptions that are often made when valuating tranches of collateralised debt obligations (CDOs) using a firm's value approach.
Those assumptions are the homogeneity and largeness of the portfolio and the so-called European approximation.
The error made in this way is measured by comparing the result to a model with less simplification which is evaluated by the use of Monte Carlo simulation.
Sprache der Kurzfassung:
International Journal of Theoretical and Applied Finance