Cdo Pricing Models Based On Single Factor Copula And Numerical Analysis

In recent years, CDO has developed rapidly. How to assess the risk of CDO and evaluate its fair spreads is an important factor promoting its healthy development. Domestic research scholars and Insiders of practitioners less involved in related fields. CDO’s credit risk is rarely discussed and lacks of evaluation system.Ultimately, Fail to Price CDO accurately and Reasonably. To analyze CDO pricing deeply has a very broad application prospects for promoting China’s financial reform. This paper has given specific pricing steps of two single factor Copula CDO pricing model based on t-NIG distribution and G-NIG distribution in a large sample of homogeneous portfolio (LHP):Calculate probability of default and loss distribution of CDO assets in asset pool; Based on no-arbitrage principle, get the calculation formula of CDO tranches spreads by CDO pricing semi-analytical method.Finally, Based on the pricing model,have carried out the numerical analysis for each tranche of Dow Jones iTraxx Europe index on April13,2006.Pricing results based on several single factor Copula pricing model in this article have compared with market prices of the Dow Jones iTraxx Europe index.Have found the results of the G-NIG Copula pricing models fit quoted market prices most, and the distribution that factor variable on single-factor Copula model obeyed and the number of free parameters in the model is two important factors deciding the fit degree of market quotations with CDO pricing. Furthermore, construct the single factor Copula CDO pricing model with2-state,3-state stochastic correlation structure. for expansion. Provide theoretical and empirical reference for the improvement and application of pricing models.