Published November 25, 2022
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Mapping CDO2&3 to Risk Equivalent CDO
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Description
Mapping CDO2 and CDO3 trades to risk equivalent CDO (RE-CDO) trades can be done by matching the b/e spread a RE-CDO is calculated and taken as the proxy of a target CDO2 or CDO3 trade. Then the MTM of the CDO2 or CDO3 trade can be calculated using the market observed correlations by finding the MTM of the proxy via index base correlations.
Notes
https://ia601402.us.archive.org/23/items/correlation-calibration/CorrelationCalibration.pdf
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CDOnMapping.pdf
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(108.2 kB)
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