Stochastic spread CDO model?

j20056 · December 19th, 2005, 8:11 am

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)?

scholar · December 19th, 2005, 6:39 pm

There are two recent papers on this subject - one by Schonbucher, and another by Andersen-Peterbarg-Sidenius. Neither of them presents any numerical tests though. Check out defaultrisk.com

Jonathan81 · December 20th, 2005, 8:16 am

There is an article of Nordine bennani too, but it's not about stochastic spread, it's with dynamic loss to match you skew over severals maturitiesJonathan