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The valuation of collateralised debt obligations: multi-period modelling in a risk-neutral framework

O'Kelly, Brian Gerard (2005) The valuation of collateralised debt obligations: multi-period modelling in a risk-neutral framework. PhD thesis, Dublin City University.

For over fifty years, mortgages have been securitised by selling the rights to the mortgage cash flows to third party investors. Over the past ten years or so, a similar securitisation process has been undertaken with corporate debt. The claims on the cash flowing from the corporate debt portfolio are called collateralised debt obligations (CDO). CDO cash flows are dependent on the interaction of a portfolio of debt securities over many time periods. They are particularly sensitive to the correlation among the underlying secunties and to the terms of the indenture. While much progress has been made in modelling debt portfolios over a single period, there has been a lot less published about the interaction of debt secunties m a portfolio over many penods. This thesis develops a model for valuing CDOs using a nsk-neutral approach in a multiperiod setting. A model is also developed which reproduces Moody’s CDO rating. The Moody’s rating is compared to that which is implied from applying the nsk-neutral model, the differences analysed and the implications for regulatory capital for CDOs explored.
Item Type:Thesis (PhD)
Date of Award:2005
Supervisor(s):Gallagher, Liam
Uncontrolled Keywords:Collateralised Debt Obligations; CDOs; Debt portfolios; Modelling
Subjects:Business > Finance
DCU Faculties and Centres:DCU Faculties and Schools > DCU Business School
Use License:This item is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 3.0 License. View License
ID Code:18139
Deposited On:10 May 2013 10:41 by Celine Campbell . Last Modified 10 May 2013 10:41

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