Implied Loss Distribution, Term Structure of Correlation Skew and ...

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Tranche Loss as an Option on the Total Portfolio Loss Tranche Loss v.s. Total Loss 30 25 Tranche Loss 20 15 10 Super Senior Senior Mezzanine Mezzanine Subord Equity 5 0 - 10.00 20.00 30.00 40.00 Total Loss 10
Base Correlation For each CDO tranche loss leg could be deemed as a call spread on the loss distribution, long a call with the strike equal to detachment amount and short a call with a strike equal to the attachement amount Implied correlation should be quoted against only equity tranches with different detachment points. This would give a consistent framework. The hedge ratio would be different in two cases: using base correlation and not using base correlation 11
Page 1 and 2: Implied Loss Distribution, Term Str
Page 3 and 4: Some of the latest Credit Portfolio
Page 5 and 6: Default Correlation: The Joy of Cop
Page 7 and 8: How do we simulate the default time
Page 9: Excess Loss Distribution Excess Los
Page 13 and 14: Various Extension of Basic Gaussian
Page 15 and 16: Mixture Copula Function: Discrete C
Page 17 and 18: Implied Loss Distribution An equity
Page 19 and 20: Comparison of Leverage Ratios Compa
Page 21 and 22: Term Structure of Base Correlation
Page 23 and 24: Dynamic Models Based on Portfolio L

Implied Loss Distribution, Term Structure of Correlation Skew and ...

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