New method revolutionizes pricing and risk analysis of structured credit transactions!
Structured credit transactions like CDOs and first-to-default swaps depend on the default performance of a group of issuers. The risk analysis and pricing of these transactions can be done using simulation or analytical methods. The risk structure of CDOs can be determined using the large homogenous portfolio approximation. Analyzing structured credit transactions helps financial institutions with pricing routines for CDOs and multi-period CDOs, as well as simulation-based pricing.