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20 views

In May of 2005, several large hedge funds had speculative positions in CDO tranches

These hedge funds were forced into bankruptcy. This was due to: the correct answer is: Long Mezzanine and Short Equity Tranche position when correlation of Mezzanine tranche decreased. Can anyone ...
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1answer
42 views

ABS vs covered bonds vs CDO [closed]

What is the difference between asset-backed securities(ABS), covered bonds and collateralized debt obligations (CDO)?
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1answer
118 views

CDO selling or buying credit protection?

I think there is an error in the Meissner text - Correlation Risk Modeling and Management and can't find an errata for this text to verify. On page 19 the foot note reads: Shorting the equity ...
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2answers
73 views

CDO tranche spread

An increase in default correlation ceteris paribus increases the value of the equity tranche of a CDO. This I get. How then, do I make sense of the statement that as default correlation in the ...
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1answer
977 views

What is Base- vs. Implied Correlation of a CDO tranche?

What is the difference between Base Correlation and Implied Correlation for a CDO tranche?
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3answers
379 views

Understanding CDOs

I watched every documentary on the financial crisis and CDOs, tried to understand Wikipedia etc.. but still not getting the full picture as examples seem to be limited (or complicated). Say ...
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1answer
175 views

Any example code implementing the Shelton CDO 'Back To Normal' Paper?

I'm having a hard time getting my expected loss calculations to tie out with the standard recursion method when implementing the proxy distribution algorithm described by the Back To Normal CDO paper ...
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1answer
415 views

Correlation skew mapping

What methods can be used to map the correlation skew of a credit index on a bespoke CDO portfolio?