Paper Info
Title
Approximations and control variates for pricing portfolio credit derivatives
Abstract
Portfolio credit derivatives that depend on default correlation are increasingly widespread in the credit market. Valuing such products often entails Monte Carlo simulation. However, for large portfolios, plain Monte Carlo simulation can be slow. In this paper, we develop approximation methods for pricing collateralized debt obligation (CDO) tranches in the widely used factor copula approach. We also discuss using the approximations as control variates to improve the precision of Monte Carlo estimates. These approximation methods and control variate techniques could be applied to pricing other portfolio credit derivatives as well.
Year
DOI
Venue
2007
10.1109/WSC.2007.4419694
Winter Simulation Conference
Keywords
Field
DocType
pricing portfolio credit derivative,monte carlo simulation,factor copula approach,large portfolio,control variate,monte carlo estimate,control variate technique,collateralized debt obligation,simulation,monte carlo methods,credit market,plain monte carlo simulation,approximation method,pricing,portfolio credit derivative,monte carlo,credit derivative,control variates
Econometrics,Credit derivative,Collateralized debt obligation,Monte Carlo methods for option pricing,Monte Carlo method,Actuarial science,Copula (linguistics),Computer science,Simulation,Control variates,Bond market,Portfolio
Conference
ISBN
Citations 
PageRank 
978-1-4244-1306-5
0
0.34
References 
Authors
2
2
Name
Order
Citations
PageRank
Zhiyong Chen117725.67
Paul Glasserman249695.86