<t>If its transparency you want, I’ve go a better idea: Eliminate Taxation of Corporations and Institute a National Sales Tax on all Goods and Services. There's plenty of information about this on the web, so I won't bore you with the details. Offshore SPE's would be a thing of the past (unless you ...

mf42,I'm still thinking about your comment. You may be right, as my results for some of the lower mezz tranches do look a bit off. I'll write back when I've had a chance to look at the problem again.Andrew

<t>ljcao,Both legs are calculated with the unconditional distributions. The PD is the probabability that losses are in bucket K, therefore, to calculate the premium leg, I use PD x remaining principle x Discount factor x YearFrac to take the expectation. For the Default Leg, its i bit more involved....

<t>ljaco,Thanks for the comments,In reference to the correlation, I'm making correlation equal to the square root of the user-supplied number when I read it from the sheet. Also, they make reference to the fact that you can (and probabably should) have different bucket sizes for each of the tranches...

<t>Jen,I understand what you're saying, but when I try that I don't get probabilities that sum to one. I can't quite understand why. I think it must have something to do with the UK == k condition, where you take a probability out of the prior P vector. I'll have to think about this some more this a...

<t>Jennifer,I don't think that's correct. Re-reading pages 27 and 28 of the paper, there is one of two things he could have meant.1) The "Probability Shift" happens each time you add an asset.2) "Probability Shift" happens K times for for each of your assets.I tend to believe it's the later. In othe...

I'll try that out and let you know what happens.Andrew

<t>Opps, sorry for the blank message.Jennifer, perhaps we can help each other out. I'm attaching an excel sheet that I've been working on. The answers appear to be close to the ones published in the HW paper, but I'm not satisfied that they are correct. The calculation is painfully slow, but at leas...

<t>Perhaps I 'm a bit dense, but I'm having trouble finishing off the problem. I've computed all the probabilities they mention in the paper, but I'm not sure what to do with them. To clarify, I've got loss distributions for each time t across the buckets, but how to price the CDO tranche? Perhaps s...