Optimal structuring of collateralized debt obligation contracts: an optimization approach

IF 0.3 4区经济学 Q4 Economics, Econometrics and Finance

Journal of Credit Risk Pub Date : 2012-12-01 DOI:10.21314/JCR.2012.153

Alexander Veremyev, Peter Tsyurmasto, S. Uryasev

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引用次数: 3

Abstract

The objective of this paper is to help a bank originator of a collateralized debt obligation (CDO) to build a maximally profitable CDO. We consider an optimization framework for structuring CDOs. The objective is to select attachment/ detachment points and underlying instruments in the CDO pool. In addition to “standard” CDOs we study so-called “step-up” CDOs. In a standard CDO contract the attachment/detachment points are constant over the life of a CDO. In a step-up CDO the attachment/detachment points may change over time. We show that step-up CDOs can save about 25–35% of tranche spread payments (ie, profitability of CDOs can be boosted by about 25–35%). Several optimization models are developed from the bank originator perspective. We consider a synthetic CDO where the goal is to minimize payments for the credit risk protection (premium leg), while maintaining a specific credit rating (assuring the credit spread) of each tranche and maintaining the total incoming credit default swap spread payments. The case study is based on the time-to-default scenarios for obligors (instruments) generated by the Standard & Poor’s CDO Evaluator. The Portfolio Safeguard package by AORDA was used to optimize the performance of several CDOs based on example data.

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债务抵押债券合约的最优结构:一种最优化方法

本文的目的是帮助银行发起的担保债务凭证(CDO)建立一个最大利润的CDO。我们考虑了构建cdo的优化框架。目标是在CDO池中选择附属/分离点和基础工具。除了“标准”cdo，我们还研究了所谓的“升级型”cdo。在标准的CDO合同中，依附/分离点在CDO的整个生命周期内是恒定的。在渐进式CDO中，附着/分离点可能随时间变化。我们表明，升级cdo可以节省约25-35%的分期息差支付(即，cdo的盈利能力可以提高约25-35%)。从银行发起人的角度出发，建立了若干优化模型。我们考虑一个合成CDO，其目标是最小化信用风险保护(溢价部分)的支付，同时保持每个部分的特定信用评级(确保信用利差)，并保持总信用违约掉期利差支付。该案例研究基于标准普尔CDO评估器生成的债务人(工具)违约时间情景。基于实例数据，利用AORDA的Portfolio Safeguard软件包对多个cdo进行了性能优化。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Credit Risk BUSINESS, FINANCE-

CiteScore

0.90

自引率

0.00%

发文量

期刊介绍： With the re-writing of the Basel accords in international banking and their ensuing application, interest in credit risk has never been greater. The Journal of Credit Risk focuses on the measurement and management of credit risk, the valuation and hedging of credit products, and aims to promote a greater understanding in the area of credit risk theory and practice. The Journal of Credit Risk considers submissions in the form of research papers and technical papers, on topics including, but not limited to: Modelling and management of portfolio credit risk Recent advances in parameterizing credit risk models: default probability estimation, copulas and credit risk correlation, recoveries and loss given default, collateral valuation, loss distributions and extreme events Pricing and hedging of credit derivatives Structured credit products and securitizations e.g. collateralized debt obligations, synthetic securitizations, credit baskets, etc. Measuring managing and hedging counterparty credit risk Credit risk transfer techniques Liquidity risk and extreme credit events Regulatory issues, such as Basel II, internal ratings systems, credit-scoring techniques and credit risk capital adequacy.