2005•The Journal of RiskRequires access

Basket default swaps, CDOs and factor copulas

Jean‐Paul Laurent, Jon Gregory

Abstract

ABSTRACT We consider a factor approach to the pricing of basket credit derivatives and synthetic collateralized debt obligation (CDO) tranches. Our purpose is to deal in a convenient way with dependent defaults for a large number of names. We provide semi-explicit pricing formulae for basket default swaps and CDO tranches. Two cases are studied in detail: mean-variance mixture models and frailty models. We also compare prices under Gaussian and Clayton copulas.

About this research paper

What this paper is about

Why it matters

OpenAlex reports 264 citations for this work. Citation counts describe recorded attention and do not establish research quality.

Key contribution

A contribution statement is not available in the OpenAlex record.

Method / approach

Method details are not available in the OpenAlex metadata.

Main findings

Findings are not separately available in the OpenAlex metadata.

Limitations

Limitations are not available in the OpenAlex metadata.

Applications

Application details are not available in the OpenAlex metadata.

Available abstract

Key concepts: Collateralized debt obligation, Credit derivative, iTraxx, Default, Synthetic CDO, Credit default swap, Actuarial science, Econometrics