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Questions tagged [cdo]

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Collateralized Bond Obligations History

Collateralized Bond Obligations (CBOs) were a form of CDOs that were more popular in the early 2000s. I am looking for: Historical loss rates on their tranches (if available) Whether historically any ...
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2answers
79 views

Why does/did a CDO need a “sponsor”?

I've been reading a lot of about the "Magnetar trade" (see pro-publica article here and the links therein, as well as this paper), and I'm slightly confused by the argument about how Magnetar (and ...
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1answer
394 views

CDO tranche Pricing : Default probability

I'm trying to compute the price of a CDO at any time, using the one factor gaussian copula and the Large Homogenous Portfolio Approximation. You can find the CDO pricing formula in M. Neugebauer (2007)...
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149 views

Implied correlation

Have I understood it correctly if the standard way to calculate implied correlation is the Gaussian Copula model where we: Calibrate the underlying portfolio to get a homogenous default probability ...
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146 views

CDO Implied correlation: what for?

Reading about CDOs and calibration to find the implied correlation, I came up with the following question. Suppose we are pricing a CDO over a pool of $N=125$ names, using the usual Gaussian copula ...
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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
2k 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
725 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
1k 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
3k 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
446 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 Local-...
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1answer
206 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
546 views

Correlation skew mapping

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