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Conference publications

Abstracts

XIX conference

The Loss Distribution Mathematical Modelling and the Industrial Companies Credit Default Swaps

Stikhova O.V.

Moscow State Technological University “STANKIN”, chair “ The Applied Mathematics Vadkovsky lane 1a, Moscow, 127055, Russia, +7(499)972-95-20, E-mail: olgitast@smtp.ru

1 pp. (accepted)

The credit derivatives mathematical models creation and the construction of single and multiple name obligation default probability projection are the actual problem recently. The credit derivatives such the collateralized debt obligation (CDO) and the credit default swaps (CDS) being the developed countries economy condition changes indicators are investigated in this work [1]. To quote the base portfolio CDS and CDO tranches our single and multiple name default probability developed models are used respectively. The default time distribution was calibrated according to the basis CDS rates [2]. When there are no credit cases, the CDO obligor regularly pays the premium (insurance payment) to the tranche investor. In the case of default the investor (the protection seller) pays to the CDO obligor (protection buyer) the sum equals the sum of loss. The next premium (insurance payment) is paid deducting the sum of loss. We analyzed the portfolio credit derivatives loss distribution models such as the one factor Gaussian copula model, the double normal inverse one factor Gaussian copula model, the same models with the stochastic factors and we considered the large portfolio approximations in these models [3]. A series of computing experiments on market products price parameters modeling of the industrial companies default credit derivatives and collateralized debt obligation both with generated samples and real data and the results verification were made. The calculations findings for the various activity field enterprises have shown the developed models and algorithms high efficiency.

References

1. Stikhova O.V. Credit Derivatives Mathematical Modelling. /XLII The National Conference of the Mathematics, Informatics and Chemistry problems. Working Paper. -М: RUDN, 2009, стр.123-124.

2. Lehman Brothers The Lehman Brothers guide to exotic credit derivatives. Risk Waters Group, 2003

3. Vasicek O. The Distribution of Loan Portfolio Value. Risk, 12 (2002).



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