Research and Empirical Study on CDO Loss Distribution Based on Binomial Expansion Technique
Chunmei Gao · Tongji yu xinxi luntan · 2008
How to deal with the correlation between assets is the key of measuring the credit level of CDO.This paper introduces the Binomial Expansion Technique and puts forward a method of Monte Carlo Simulation used to measure the loss distribution of CDO,and they deal with the default correlation between assets in different way.The result shows that the method of Monte Carlo Simulation can be used to predict the credit level of CDO accurately.