Financial Engineering Seminar
October, 25, 2006(Tue)
Time: 4:05 pm,
Place: 303 Weil Hall (conference room)
In the talk we frst present the basic mathematical modeling features of Collaterized Debt Obligations. Here we will concentrated on synthetic products which are based on Credit Default Swaps. Then the standard "Greeks" are examined. Diferent from most standard option products, the Gamma is not very informative. The non-linearity is usually measured in terms of gap- and jump-to-default risk. We present some analytic recursion methods to calculate this fgures. The main focus of the paper however are more portfolio dependent risk measures, like spread and risk contributions. These measures are nowadays well known and easy to understand in linear portfolios. Portfolios of CDOs exhibit a nonlinear structure. But we will show how to overcome these difculties, in particular in the context of spread contributions. As a fnal topic we will show that spectral risk measures are more appropriate for the risk analysis of portfolios of CDOs than measures analyzing only a specifc part of the loss distribution, like Value-at-Risk and Expected Shortfall. Especially, the role of the risk aversion weight function becomes transparent.
Presentation (PDF)