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The Financial Risks International Forum On Structured Products And Credit Derivatives - Mar 08


Pricing Partners Derivatives-Pricing-Analytics-Independent-Valuation

February 5th, 2008 - Marian Ciucă, quant analyst for Pricing Partners, presents “A Comparative Analysis of Basket Default Swaps Pricing Using the Stein Method”, a Pricing Partners research paper at the Financial Risks International Forum on “Structured Products and Credit Derivatives” held on the 27th and 28th of March in Paris.

Subject of discussions: Structured Credit Products

This paper is coauthored by Dorinel-Marian Bastide, Eric Benhamou and Marian Ciucă, and presents an analysis of basket default swaps pricing, comparing the so called “Stein numerical method” with tree numerical methods used by the financial industry: the Recursive method of Hull and White, the Fast Fourier Transform method of Laurent and Gregory, and the Monte Carlo method. Stein numerical method was recently studied by El Karoui and Jiao, and applied to the pricing of the CDO tranches.  The paper compares these numerical methods in terms of accuracy and efficiency, in the Factor Copula Model framework, using various copula functions: one factor and multi factor Gaussian copula, Clayton copula, Marshall-Olkin copula, Double-t copula and Student copula. 


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