CDO pricing based on Laplace Transform in Multifactor Models

doi:10.11908/j.issn.0253-374x.2018.02.018

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CDO pricing based on Laplace Transform in Multifactor Models
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                        10.11908/j.issn.0253-374x.2018.02.018
                    
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                        马卫锋马卫锋

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孙丽华孙丽华

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Abstract:

The multifactor version of Copula models is useful in fitting the complex correlation structure among the base portfolio of CDOs. However, plain Monte Carlo simulation is quite incapable of accurately measuring rare but significant loss events. We provide a fast numerical inversion of conditional Laplace transform in multifactor models.The method is capable of estimating loss probability P(L>y) and expected loss E[L∧y].Numerical examples illustrate the efficiency of the method, especially when handling rare events.

Key words:CDOs, multifactor;models, Laplace;transform, Numerical;inversion, variance;reduction

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马卫锋,,孙丽华. CDO pricing based on Laplace Transform in Multifactor Models[J].同济大学学报(自然科学版),2018,46(02):260~263

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Received:May 12,2017
Revised:December 17,2017
Adopted:October 12,2017
Online: March 20,2018
Published:

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