By a News Reporter-Staff News Editor at Investment Weekly News -- Researchers detail new data in Computational Finance. According to news reporting originating in Waterloo, Canada , by VerticalNews editors, the research stated, "In this paper we continue the study of the stress event model, a simple and intuitive dynamic model for credit risky portfolios, proposed by Duffie and Singleton. The model is a bottom-up version of the multifactor portfolio credit model proposed by Longstaff and Rajan." The news reporters obtained a quote from the research from the University of Waterloo , "By a novel identification of independence conditions, we are able to decompose the loss distribution of a credit risky portfolio into a series expansion which not only provides a clear picture of the characteristics of the loss distribution but also suggests a fast and accurate approximation for it. Our approach has three important features: it is able to match standard credit default swap (CDS) index tranche prices and the underlying CDS spreads; its computational speed is very fast, comparable to that of the Gaussian copula model; and the computational cost for additional factors is mild, allowing for more flexibility for calibrations and opening up the possibility of studying multifactor default dependence of a portfolio via a bottom-up approach." According to the news reporters, the research concluded: "We demonstrate the tractability and efficiency of our approach by calibrating a three-sector model to investment-grade CDS index tranches." For more information on this research see: A multifactor bottom-up model for pricing credit derivatives. Journal of Computational Finance , 2013;17(1):93-114. Journal of Computational Finance can be contacted at: Incisive Media, Haymarket House, 28-29 Haymarket, London , SW1Y 4RX, England . Our news correspondents report that additional information may be obtained by contacting L.K. Tsui , University of Waterloo , Fac Math, Waterloo, ON N2L 3G1, Canada . Keywords for this news article include: Canada , Ontario , Waterloo , Computational Finance, North and Central America Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2014, NewsRx LLC
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