{"title":"Fine-Tuning the Equivalent Strike Framework for Bespoke CDO Pricing","authors":"Moez Mrad, Racem Triki","doi":"10.2139/ssrn.1832384","DOIUrl":null,"url":null,"abstract":"This paper presents a fine-tuning of some mapping functions used in the Equivalent Strike framework. This new approach provides an equivalent strike that is independent from the index base correlation. This feature is valuable when pricing very junior and senior tranches or when computing index tranches (or index base correlation) sensitivities. Our numerical tests on realistic cases showed that the equivalent correlation provided by this new is pretty close to what is computed with common mapping functions","PeriodicalId":221813,"journal":{"name":"Harvard Economics Department Working Paper Series","volume":"2013 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2011-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Harvard Economics Department Working Paper Series","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.1832384","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
This paper presents a fine-tuning of some mapping functions used in the Equivalent Strike framework. This new approach provides an equivalent strike that is independent from the index base correlation. This feature is valuable when pricing very junior and senior tranches or when computing index tranches (or index base correlation) sensitivities. Our numerical tests on realistic cases showed that the equivalent correlation provided by this new is pretty close to what is computed with common mapping functions
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