A CDO option market model on standardized CDS index tranches

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  • Jochen Dorn, Denmark
We provide a market model which implies a dynamic for standardized CDS index tranche spreads. This model is useful for pricing options on tranches with future Issue Dates as well as for modeling emerging options on struc- tured credit derivatives. With the upcoming regulation of the CDS market in perspective, the model presented here is also an attempt to face the e ects on pricing approaches provoked by an eventual Clearing Chamber . It becomes also possible to calibrate Index Tranche Options with bespoke tenors/tranche subordination to market data obtained by more liquid Index Tranche Options with standard characteristics.
Original languageEnglish
Publication year2010
Publication statusPublished - 2010
Event6th World Congress of the Bachelier Finance Society - Toronto, Canada
Duration: 22 Jun 201026 Jun 2010


Conference6th World Congress of the Bachelier Finance Society

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ID: 238164