Risk and Valuation of Collateralized Debt Obligations (PDF, 2001) Sep 04 2019 15:48 languageMoneyScience
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Darrell Duffie and Nicolae Gârleanu
Financial Analysts Journal, 2001
In this discussion of risk analysis and market valuation of collateralizeddebt obligations, we illustrate the effects of correlation and prioritizationon valuation and discuss the “diversity score” (a measure of the risk of theCDO collateral pool that has been used for CDO risk analysis by ratingagencies) in a simple jump diffusion setting for correlated defaultintensities.