here is the message...hi all,as part of my curriculum in college i am thinking of doing a project on CDO pricing and risk management. I wud request people to suggest some interesting problems which someone with a "JC Hull: Options, futures and derivatives" level knowledge in derivatives + a degree in engineering + willingness to read about new stuff can work on.regardsmoti

Atul, to be honest I think your best bet would be to talk to an academic in the area of credit product pricing at your college after having read some current literature. I am always weary of thsis ideas other people give you (in papers, forums etc), as if the idea truly was such an excellent innovation surely they would have run with it?!After reading a dozen papers common problems seem to recur, which often form a basis for a worthwhile contribution. For example, I am writing my thesis on the base correlation skew's dynamics, as explaining the correlation skew is a serious problem in credit pricing at the moment. I am hoping to provide some insight into which model is best used to explain the correlation skew from an alternative angle, as generating a static correlation skew is sufficient.Here is my bibliography at the moment:[1] Altman, E., Brady, B., Resti, A. and Sironi, A., 2004, “The Link betweenDefault and Recovery Rates: Theory, Empirical Evidence, and Implications”,The Journal of Business, 78, pp 2203-2228[2] Andersen, L. and Sidenius, J., 2005, “Extensions to the Gaussian Copula:Random Recovery and Random Factor Loadings”, Journal of Credit Risk,1(1)[3] Burtschell, X., Gregory, J. and Laurent, J-P., 2005, “Beyond the GaussianCopula: Stochastic and Local Correlation”, working paper, BNP Paribas,Barclays Capital and ISFA Actuarial School, University Claude Bernard ofLyon[4] Burtschell, X., Gregory, J., and Laurent, J-P., 2005a, “A comparative analysisof CDO pricing models”, working paper, BNP Paribas and ISFA ActuarialSchool, University of Lyon[5] Chen, H. and Schmeiser, W., 2001, “Stochasting root finding via retrospectiveapproximation”, IIE Transactions, 33(3), pp 259-275[6] Cont, R. and da Fonseca, J., 2002, “Dynamics of implied volatility surfaces”,Quantitative Finance, 2, pp 45-60[7] Duffie, D. and Gˆarleanu, N., 2001, “Risk and Valuation of Collateralized DebtObligations”, Financial Analysts Journal, 57(1), pp 41-59[8] Elizalde, A., 2005, “Credit Risk Models IV: Understanding and pricingCDOs”, working paper, Centro de Estudios Monetarios y Financieros(CEMFI), Madrid[9] Hull, J. and White, A., 2004, “Valuation of a CDO and an n-th to defaultCDS without Monte Carlo simulation”, Journal of Derivatives, 12(2), pp 8-16[10] Joshi, M. and Stacey, A., 2006, “Intensity Gamma: a New Approach to PricingPortfolio Credit Derivatives”, Risk Magazine, July 2006[11] Li, D., “On default correlation: A Copula function approach”, The Journal ofFixed Income, 9, pp 43-54[12] M¨uller, A., 2001, “Stochastic Ordering of Multivariate Normal Distributions”,Annals of the Institute of Statistical Mathematics, 53(3), pp 567-575[13] McGinty, L., and Ahluwalia, R., 2004, “Introducing base correlations”, JPMorgan Credit Derivatives StrategyBest of luck!

Atul,The list that Josh is suggested is very good but maybe a bit too advanced for someone whose only exposure to derivatives is Hull. Google a paper by Michael Gibson called 'Understanding the Risk of Synthetic CDOs'. This paper explains in very elementary terms what a STCDO is, and how one to price one using hazard rates.Once you're comfortable with this paper, I would recommend two more - Andersen's 'All Your Hedges in One Basket' and Hull's 'Valuation of a Synthetic CDO... Without MC Simulation'.Both papers are very similar, but I personally prefer Andersen's loss distribution method to Hull's.Josh,When you talk about corr skew dynamics, are you referring to the slope of the base correlation curve, and why it's more steep between some tranches compared to others? I would imagine that the skew would also depend on the copula used for the loss distribution calculations.

Please could someone upload this paper as I cannot find it on the net anywhere.Andersen's 'All Your Hedges in One Basket' Or alternatively email me at:fouriertransform1@yahoo.comMany thanks

hii still search for "all your hedges in one basket"any chance to get it from someone?would appreciatesergei

I´d appreciate if someone could send me as well the "all your hedge in one basket" paper.Thanks in advanceoscartorras@hotmail.com