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Fast calculation method for fine‐tuned design of need‐based collateralized debt obligation (CDO)
Author(s) -
Nakae Tatsuya,
Baba Kenji,
Moritsu Toshiyuki,
Komoda Norihisa
Publication year - 2007
Publication title -
ieej transactions on electrical and electronic engineering
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.254
H-Index - 30
eISSN - 1931-4981
pISSN - 1931-4973
DOI - 10.1002/tee.20140
Subject(s) - collateralized debt obligation , debt , portfolio , obligation , equity (law) , computer science , actuarial science , business , finance , collateral , law , political science
In this paper we propose a speed‐up method for need‐based collateralized debt obligation (CDO) that meets the investor needs of the attributes of the CDO. We note the fact that the computing time to derive the best portfolio is proportional to the number of generated contract conditions that constitute the portfolio. Our method reduces the number of portfolios that can never be the best portfolios by skipping the generation of redundant contract conditions of Super Senior (SS) debt and Equity debt, which is the main cause for the increase of the generated contract conditions. A comparative experiment indicates that the proposed method makes it possible to double the types of tranches or to raise the calculation accuracy nearly 6‐fold, keeping the urgency of the calculation. Copyright © 2007 Institute of Electrical Engineers of Japan© 2007 Institute of Electrical Engineers of Japan. Published by John Wiley & Sons, Inc.