{"title":"Pricing and Hedging of CDOs: A Top Down Approach","authors":"D. Filipović, Thorsten Schmidt","doi":"10.2139/ssrn.1472942","DOIUrl":null,"url":null,"abstract":"This paper considers the pricing and hedging of collateralized debt obligations (CDOs). CDOs are complex derivatives on a pool of credits which we choose to analyse in the top down model proposed in Filipovic et al. (2009). We reflect on the implied forward rates and bring them in connection with the top-down framework in Lipton and Shelton (2009) and Schonbucher (2005). Moreover, we derive variance-minimizing hedging strategies for hedgeing single tranches with the full index. The hedging strategies are given for the general case. We compute them also explicitly for a parsimonious one-factor affine model.","PeriodicalId":40006,"journal":{"name":"Journal of Derivatives","volume":"45 1","pages":""},"PeriodicalIF":0.4000,"publicationDate":"2009-12-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Derivatives","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.2139/ssrn.1472942","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This paper considers the pricing and hedging of collateralized debt obligations (CDOs). CDOs are complex derivatives on a pool of credits which we choose to analyse in the top down model proposed in Filipovic et al. (2009). We reflect on the implied forward rates and bring them in connection with the top-down framework in Lipton and Shelton (2009) and Schonbucher (2005). Moreover, we derive variance-minimizing hedging strategies for hedgeing single tranches with the full index. The hedging strategies are given for the general case. We compute them also explicitly for a parsimonious one-factor affine model.
期刊介绍：
The Journal of Derivatives (JOD) is the leading analytical journal on derivatives, providing detailed analyses of theoretical models and how they are used in practice. JOD gives you results-oriented analysis and provides full treatment of mathematical and statistical information on derivatives products and techniques. JOD includes articles about: •The latest valuation and hedging models for derivative instruments and securities •New tools and models for financial risk management •How to apply academic derivatives theory and research to real-world problems •Illustration and rigorous analysis of key innovations in derivative securities and derivative markets
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