Detail publikace

Main Flaws of The Collateralized Debt Obligation‘s Valuation Before And During The 2008/2009 Global Turmoil

Autor: PhDr. Petra Buzková ,
doc. PhDr. Petr Teplý Ph.D.,
Typ: IES Working Papers
Rok: 2010
Číslo: 1
ISSN / ISBN:
Publikováno v: IES Working Papers 1/2010
Místo vydání: Prague
Klíčová slova: collateralized debt obligations, Gaussian Copula, valuation, securitization
JEL kódy: G01, G32, C63
Citace: Benešová, P., Teplý, P. (2010). “ Main Flaws of The Collateralized Debt Obligation‘s Valuation Before And During The 2008/2009 Global Turmoil ” IES Working Paper 1/2010. IES FSV. Charles University.
Granty: GAČR 403/10/P278 (2010-2012) Implikace globální krize na řízení ekonomického kapitálu finančních institucí GAUK 114109 (2009-2011) Alternativní přístupy k oceňování zajištěných dluhových cenných papírů (CDO) Výzkumný záměr IES (2005-2011) Integrace české ekonomiky do Evropské unie a její rozvoj
Abstrakt: As a result of the 2008 financial crisis, the world credit markets stalled significantly and raised the doubts of market participants and policymakers about the proper and fair valuation of financial derivatives and structured products such as collateralized debt obligations (CDOs). The aim of the paper is to contribute to the understanding of CDOs and shed light on CDO valuation based on data before and during the current financial upheaval. We present the One Factor Model based on a Gaussian Copula and test five hypothesizes. Based on the results we discovered four main deficiencies of the CDO market. For our modelling we used data of the CDX NA IG 5Y V3 index from 20 September 2007 until 27 February 2009 and its quotes we appropriately transform into CDO quotes. Based on the results we discovered four main deficiencies of the CDO market: i) an insufficient analysis of underlying assets by both investors and rating agencies; ii) the valuation model was usually based only on expected cash-flows when neglecting other factors such mark-to-market losses or correlation risk; iii) mispriced correlation; and finally iv) the mark-to-market valuation obligation for financial institutions should be reviewed. Based on the mentioned recommendations we conclude that the CDO market has a chance to be regenerated. However, the future CDO market would then be more conscious, driven by smarter motives rather than by poor understanding of risks involved in CDOs.
Ke stažení: WP 2010_1_Benesova, Teply
Prosinec 2017
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