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arXiv · 0903.4478

Exact Pricing Asymptotics for Investment-Grade Tranches of Synthetic CDO's. Part II: A Large Heterogeneous Pool

Richard B. Sowers
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Abstract

We use the theory of large deviations to study the pricing of investment-grade tranches of synthetic CDO's. In this paper, we consider a heterogeneous pool of names. Our main tool is a large-deviations analysis which allows us to precisely study the behavior of a large amount of idiosyncratic randomness. Our calculations allow a fairly general treatment of correlation.

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Richard B. Sowers. 2009-03-25. Exact Pricing Asymptotics for Investment-Grade Tranches of Synthetic CDO's. Part II: A Large Heterogeneous Pool. https://arxiv.org/abs/0903.4478

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