<t>What type of trading strategies do structured credit hedge funds utilize?Is it mostly a CDO/CMBS/RMBS game where your fundamentals views on the underlying credits/assets are optimally positioned, by selecting the optimal risk/reward tranches for isntance?Are there more quantitative relative value...

<t>No I mean an actual framework like VAR, but one that focuses on extremely distressed markets. The only thing I've seen so far is CrashMetrics, from Paul Wilmott in 1998, so I assume there have been some progress made since then, especially in the last two years. Nassib Taleb is pretty vocal about...

<t>Are there benchmark papers and modeling techniques for risk management in severe market stress scenarios? I am a firm believer that VAR is ineffective at preventing a firm/fund from going belly up, and only has some meaning, however little helpful, in orderly market conditions.I read the CrashMet...

<t>If a credit hedge fund is very strong at trading distressed names, why should it bother with SCDO equity? Given that idiosyncratic (i.e. distressed trading to a large extent) is the main risk to manage, why incurring lower liquidity and correlation risk found in a SCDO equity versus managing dire...

i thought index options of different tenors as well as tranches of different tenors were enough to start, and CDO options would be a model implied product, at least to start?

<t>I wonder if the fact that there are no current discussions on this topic is a reflection of how valuable these approaches are, thence the reluctance of anyone to get into their details, or the fact that all the quants working on the implementation are currently deep into calibration and other tec...

<t>I'm considering switching from structured credit derivs trading to equity derivs. I know there are a bunch of quant traders on this board. I'm sort of tired of the whole credit correlation space. The margins are very tight, it's hard for hedge funds to launch right now, and half of the senior guy...

<t>Isn't the problem that the bespoke tranche (meaning different portfolio here -- it can also mean off-the-run strikes and maturities) might have a correlation behavior that is different from the index? For first order large correlation moves, then they should track OK. But what if the bespoke pool...

<t>I hear that there is a new approach using stochastic spreads to try to calibrate the correlation skew. I reckon a good implementation would also be useful to price spread-contingent and MTM contingent structures (leveraged super-senior, and now leveraged mezzanine).Does anyone have the paper(s)? ...

<t>I'm computing deltas for the 0-3% of the CDX.NA.IG4 index. I use market calibrated base correlations, roughly 9% at the 3% strike. However, I really use so-called normalized strikes, or strike / EL(Pool). Now, when I blip individual credit curves to get my deltas, the term EL(Pool) changes as wel...

bump

<t>JabairuStork,Can you elaborate or point reference articles that explain the "memory" of the gaussian copula that you ention below. I think what you're saying is that if you price a default leg from t1 to t2 as the difference between the leg from (0,t2) minus the leg from (0,t1), then you get a di...

<t>Can the default leg of a forward CDO tranche form (t1,t2) be priced by running only one simulation, or you need to compute the value of (0,t1) and (0,t2) and take the difference? I'm assuming the lower strike goes down regardless of when the default occurs, only losses that occured during (t1,t2)...

<t>That's too simple an answer, to check that you're not way off. I guess the real question is "what creates skews"? Is it supply/demand, or is it because of the true dependency structure of a given portfolio. I still think that the latter should be the right answer, and using supply/demand, i.e. in...

<t>Fair enough. I was wondering if any factor model was able to explain the skews (let me rephrase this: "correctly price all tranches of the index regardless of their strikes and maturities") of the iBoxx inside (or close enough to be acceptable by RM and controllers) bid-offer, thence be "extendib...