Title :
The Mixed G-VG Copula Models and LHP Approximation for CDO Pricing
Author :
Chen, Jianli ; Zhang, Biyuan ; Li, Shenghong
Abstract :
This paper presents an extension of the popular large homogeneous portfolio(LHP) approach to the pricing of CDOs, where the involved distributions are mixtures of Gaussian distribution and VG distribution. We consider the fat-tailed G-VG copula model which can effectively model "correlation skews" in CDO pricing. Our new model may bring more flexibility into the dependence structure.
Keywords :
Approximation methods; Computational modeling; Correlation; Gaussian distribution; Mathematical model; Portfolios; Pricing; CDO; LHP approximation; copula; factor model; tranche;
Conference_Titel :
Computational and Information Sciences (ICCIS), 2011 International Conference on
Conference_Location :
Chengdu, China
Print_ISBN :
978-1-4577-1540-2
DOI :
10.1109/ICCIS.2011.294
