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- Publisher Website: 10.1002/fut.21932
- Scopus: eid_2-s2.0-85050397862
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Article: Model Specification and collateralized Debt Obligation (Mis)pricing
| Title | Model Specification and collateralized Debt Obligation (Mis)pricing |
|---|---|
| Authors | |
| Keywords | CDO default correlation frailty model specification |
| Issue Date | 2018 |
| Publisher | John Wiley & Sons, Inc. The Journal's web site is located at http://www.interscience.wiley.com/jpages/0270-7314/ |
| Citation | The Journal of Futures Markets, 2018, v. 38 n. 11, p. 1284-1312 How to Cite? |
| Abstract | Complex structured products, especially collateralized debt obligations (CDOs), were at the center of the 2008 credit crisis. This paper explores the impact of modeling difficulties on CDO mispricing. Comparing pricing outputs among models with different specifications, we show that the use of a model with advanced default correlation assumptions could have reduced the amount of model‐implied AAA‐rated CDO securities. This pricing difference also has predictive power for the subsequent downgrading of AAA‐rated CDO tranches. However, the model specification is only qualitatively important for CDO mispricing, as it has a modest quantitative effect in explaining the overall pricing errors. |
| Persistent Identifier | http://hdl.handle.net/10722/278924 |
| ISSN | 2023 Impact Factor: 1.8 2023 SCImago Journal Rankings: 0.672 |
| ISI Accession Number ID |
| DC Field | Value | Language |
|---|---|---|
| dc.contributor.author | Luo, D | - |
| dc.contributor.author | Tang, DY | - |
| dc.contributor.author | Wang, SQ | - |
| dc.date.accessioned | 2019-10-21T02:16:26Z | - |
| dc.date.available | 2019-10-21T02:16:26Z | - |
| dc.date.issued | 2018 | - |
| dc.identifier.citation | The Journal of Futures Markets, 2018, v. 38 n. 11, p. 1284-1312 | - |
| dc.identifier.issn | 0270-7314 | - |
| dc.identifier.uri | http://hdl.handle.net/10722/278924 | - |
| dc.description.abstract | Complex structured products, especially collateralized debt obligations (CDOs), were at the center of the 2008 credit crisis. This paper explores the impact of modeling difficulties on CDO mispricing. Comparing pricing outputs among models with different specifications, we show that the use of a model with advanced default correlation assumptions could have reduced the amount of model‐implied AAA‐rated CDO securities. This pricing difference also has predictive power for the subsequent downgrading of AAA‐rated CDO tranches. However, the model specification is only qualitatively important for CDO mispricing, as it has a modest quantitative effect in explaining the overall pricing errors. | - |
| dc.language | eng | - |
| dc.publisher | John Wiley & Sons, Inc. The Journal's web site is located at http://www.interscience.wiley.com/jpages/0270-7314/ | - |
| dc.relation.ispartof | The Journal of Futures Markets | - |
| dc.rights | Preprint This is the pre-peer reviewed version of the following article: [FULL CITE], which has been published in final form at [Link to final article using the DOI]. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. Postprint This is the peer reviewed version of the following article: [FULL CITE], which has been published in final form at [Link to final article using the DOI]. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. | - |
| dc.subject | CDO | - |
| dc.subject | default correlation | - |
| dc.subject | frailty | - |
| dc.subject | model specification | - |
| dc.title | Model Specification and collateralized Debt Obligation (Mis)pricing | - |
| dc.type | Article | - |
| dc.identifier.email | Tang, DY: yjtang@hku.hk | - |
| dc.identifier.authority | Tang, DY=rp01096 | - |
| dc.description.nature | link_to_subscribed_fulltext | - |
| dc.identifier.doi | 10.1002/fut.21932 | - |
| dc.identifier.scopus | eid_2-s2.0-85050397862 | - |
| dc.identifier.hkuros | 308113 | - |
| dc.identifier.volume | 38 | - |
| dc.identifier.issue | 11 | - |
| dc.identifier.spage | 1284 | - |
| dc.identifier.epage | 1312 | - |
| dc.identifier.isi | WOS:000447149800001 | - |
| dc.publisher.place | United States | - |
| dc.identifier.issnl | 0270-7314 | - |