On Rating Cash Flow CDO's using the BET Techinique

DefaultRisk.com the web's biggest credit risk modeling resource.

Submit Your Paper

Post Your Résumé

For Recruiters

Today's Featured Book

Advanced Analytical Models, + DVD: Over 800 Models and 300 Applications from the Basel II Accord to Wall Street and Beyond
by Johnathan Mun, Wiley, May 2, 2008, Hardcover, 1032 pages

Training Discounted for DefaultRisk.com visitors only:

The Mathematics of Credit Derivatives: The Essential Credit Modelling and Pricing Companion
by Philipp J. Schönbucher,
WBS Training, August 2003, DVD / Interactive CD-ROM

Sponsor:
Shop at Amazon.com and support DefaultRisk.com

On Rating Cash Flow CDO's using the BET Technique

by João Garcia of Dexia Group
Tom Dewyspelaere of Dexia Group
Ronny Langendries of Dexia Group
Luc Leonard of Dexia Group
Tony Van Gestel of Dexia Group

October 8, 2004

Abstract: This paper begins with a short explanation of what collaterilised debt instruments (CDO's) are and how investors might use them. We give detailed descriptions of the waterfall and the binomial expansion technique (BET) first proposed and developed by Moody's. We then test how the model parameters affect the rating of the different tranches of a real contract (a cash flow CDO).

JEL Classification: G19, C19.

Keywords: Collateralised Debt Obligation, BET, Cash flow CDO, Rating Structured deals.

Books Referenced in this Paper: (what is this?)