• David Lee deposited Calculating Risk Sensitivities for Monte Carlo Approach in the group Group logo of Public HumanitiesPublic Humanities on Humanities Commons 3 months, 1 week ago

    This article presents a model for pricing complex CDO structures and compute the sensitivities of the risk factors. The complex CDO structures need to be priced using the market information on tranche losses at multiple points of time. Currently, the model is being used for the valuation of forward starting CDO trades (FSCDO) and loss-trigger leverage super senior tranches (LT-LSS). In the model, a more robust and efficient method is employed to compute the sensitivities of the risk factors that can be replicated by calibrating instruments. The model is also improved to handle bucketed credit spread sensitivities and bucketed default sensitivities. The credit spread sensitivity, default sensitivity, correlation sensitivity, and interest rate sensitivity for FSCDO trades have been implemented in the model.