Advancing the Field of Quantitative Finance
formerly the IAFE

Event

Event:The Need for Second Generation Models for Structured Credit Products
Date:May 7, 2008
Time: 5:00 Registration, 5:30 Program Begins, 7:00 Reception
Location:
PricewaterhouseCoopers
300 Madison Avenue
New York

The Credit Risk Committee of the International Association of Financial Engineers presents

The Need for Second Generation Models for Structured Credit Products

Panelists (Click on name to view presentation):
Michel Crouhy, Natixis
Dan Rosen, R2 Financial Technologies and The Fields Institute
Igor Halperin, JPMorganChase

The overwhelming growth of the CDO market over the past year has driven significant innovations in the modelling and pricing of structured credit instruments and CDOs,. In practice, however, industry participants have still largely relied on first generation of models, with well documented practical and theoretical limitations. For example, the Gaussian Copula framework as commonly applied to price synthetic CDOs is static in nature and not arbitrage-free, and its treatment of bespoke portfolios is ad hoc. Furthermore, given their complexity, the valuation of cash CDOs still commonly relies on simple bond-models and matrix pricing, and the application of more sophisticated option-pricing models for this instruments is not common practice.

This session introduces new developments of practical models for structured credit valuation and risk. In particular, we discuss the application of dynamic models for pricing and hedging synthetic CDOs, and detailed bottom-up models to value bespoke portfolios and cash CDOs using Monte Carlo techniques.

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