Loehr, Sebastian and Mursajew, Olga and Roesch, Daniel and Scheule, Harald (2013) Dynamic Implied Correlation Modeling and Forecasting in Structured Finance. JOURNAL OF FUTURES MARKETS, 33 (11). pp. 994-1023. ISSN 0270-7314, 1096-9934
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Correlations are the main drivers for credit portfolio risk and constitute a major element in pricing credit derivatives such as synthetic single-tranche collateralized debt obligation swaps. This study suggests a dynamic panel regression approach to model and forecast implied correlations. Random effects are introduced to account for unobservable time-specific effects on implied tranche correlations. The implied-correlation forecasts of tranche spreads are compared to forecasts using historical correlations from asset returns. The empirical findings support our proposed dynamic mixed-effects regression correlation model. (c) 2013 Wiley Periodicals, Inc.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | RISK; DEBT; |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Statistik und Risikomanagement (Prof. Dr. Rösch) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 27 Mar 2020 08:41 |
| Last Modified: | 27 Mar 2020 08:41 |
| URI: | https://pred.uni-regensburg.de/id/eprint/15824 |
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