Discrete Tenor Models for Credit Risky Portfolios Driven by Time-Inhomogeneous Levy Processes

作者：Eberlein Ernst^*; Grbac Zorana; Schmidt Thorsten

来源：SIAM Journal on Financial Mathematics, 2013, 4(1): 616-649.

DOI：10.1137/110827132

• collateralized debt obligations
• loss process
• single tranche CDO
• ESB
• top-down model
• discrete tenor
• market model
• time-inhomogeneous Levy processes
• Libor rate
• affine processes
• extended Kalman filter
• iTraxx

The goal of this paper is to specify dynamic term structure models with discrete tenor structure for credit portfolios in a top-down setting driven by time-inhomogeneous Levy processes. We provide a new framework, conditions for absence of arbitrage, explicit examples, an affine setup which includes contagion, and pricing formulas for single tranche collateralized debt obligations (STCDOs) and options on STCDOs. A calibration to iTraxx data with an extended Kalman filter shows an excellent fit over the full observation period. The calibration is done on a set of CDO tranche spreads ranging across six tranches and three maturities.

• 出版日期2013