Workshop
"Handling and modelling of asset backed securities"
October 22-24, 2008,
EURANDOM, Eindhoven, The Netherlands
Xinzheng Huang (Universiteit Delft)
Generalized beta regression models for random loss-given-default
We propose a new framework for modeling systematic risk in Loss-Given-Default (LGD) in the context of credit portfolio losses. The class of models is very flexible and accommodates well skewness and heteroscedastic errors. The quantities in the models have simple economic interpretation. Inference of models in this framework can be unified. Moreover, it allows efficient numerical procedures, such as the normal approximation and the saddlepoint approximation, to calculate the portfolio loss distribution, Value at Risk (VaR) and Expected Shortfall (ES).
Henrik Jönsson (EURANDOM)
Advanced Models for Pricing Constant Maturity Credit Default Swaps
Abstract: In the talk we take a firm value approach to model defaults based on single sided jump models and we discuss how we can use these models to price Constant Maturity Credit Default Swaps (CMCDS). The CMCDS offers default protection in exchange for a floating premium which is periodically reset and indexed to the market spread on a CDS with constant maturity tenor written on the same reference name. By setting up a firm value model based on single sided Lévy models we can generate dynamic spreads for the reference CDS. The valuation of the CMCDS can then easily be done by Monte Carlo simulation.
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