The Hidden Correlation of Collateralized Debt Obligations
Custom Dissertation – model for the correlation structure of reference portfolios
We advise a model for the correlation structure of reference portfolios of collateralized debt obligations. The model is capable of exhibiting distinctive characteristics of the implied correlation smile (skew, respectively) observed in the market. Thus, it features a simple economic interpretation and is computationally inexpensive as it obviously integrates into the factor model framework.
