We will introduce some fundamental credit-linked financial instruments, such as Credit Default Swaps (CDS) and Collaterized Debt Obligations (CDO). These products have received an enormous amount of attention in recent years and pricing methods for them constitute one of the most active research areas in industry as well as academia. We consider an intensity based approach to pricing these products, and show that with a bottom-up approach we can create default correlation between firms, and are able to fit the market observed loss distribution.
Speaker: Jesus Rodriguez, Rutgers University