Economics, Econometrics and Finance
8 years ago

Financial engineering revolutionizes credit markets with securitization and structured products.

Elsevier eBooks
Securitization, ABSs, CDOs, and Credit Structured Products
Robert Kosowski, Salih N. Neftçi

Paper Summary

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The article explains how securitization, ABSs, and CDOs work, and their role in the financial crisis. It discusses the valuation of CDO tranches and how their prices are linked to default correlation. The concept of correlation trading is introduced, along with credit indices like ABX and LCDX. Various credit structured products are explored, including CoCos, and how financial engineering principles can be used to price them.