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Correlation Smile, Volatility Skew and Systematic Risk Sensitivity of Tranches.

Hamerle, Alfred and Igl, Andreas and Plank, Kilian (2012) Correlation Smile, Volatility Skew and Systematic Risk Sensitivity of Tranches. Journal of Derivatives. (In Press)

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Abstract

The classical way of treating the correlation smile phenomenon with credit index tranches is to choose a sufficiently flexible model and fit it to tranche market prices. In this article we go a step further and try to explain the tranche prices more fundamentally without directly fitting them. To this end, we use a risk neutral measure of the market factor which we derive from equity index ...

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Item Type:Article
Date:2012
Institutions:Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Entpflichtete oder im Ruhestand befindliche Professoren > Lehrstuhl für Statistik (Prof. Dr. Alfred Hamerle)
Subjects:300 Social sciences > 330 Economics
300 Social sciences > 310 General statistics
Status:In Press
Refereed:Yes, this version has been refereed
Created at the University of Regensburg:Yes
Owner: Kilian Plank
Deposited On:24 Mar 2011 07:39
Last Modified:19 Jan 2012 15:06
Item ID:20258
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