STCDO Pricing Engine: Single-tranche CDO pricing & risk engine

The STCDO Pricing Engine employs a Gaussian copula framework with stochastic recovery, semi-analytic method, including an internal CDS calibration to extract the hazard rates from CDS quotes and a CDO calibration to extract base correlations from a standard credit index (e.g., DJ Itraxx).

The STCDO Pricing Engine prices standard credit index tranches and includes the following features:

• User specified tranche attachment/detachment points, tranche coupons and upfront point.
• Arbitrary number of names in the CDO and their corresponding portfolio weights.
• CDS spreads (or coupons) and upfront points for each name in the CDO.
• Discrete levels of stochastic recovery for each name and the corresponding probability level.
• Coupon date and maturity date adjustments, roll conventions, choice of day count basis and holiday calendar support.
• New GPU-enabled version takes advantage of NVIDIA graphics processors and delivers accelerations up to 165x faster than serial code. No CUDA or parallel programming expertise needed.

Output Data

• Tranche present value
• Tranche fair spread, given the upfront points
• Tranche fair upfront point, given the coupon rate
• Tranche mark-to-market value (holder)
• Tranche cash settlement amount (buyer)

Like all SciComp solutions the STCDO Pricing Engine can be enhanced/modified to meet any particular modeling needs you may have and is available as C/C++ source code, Windows/Linux executable, or a ready-to-use Excel spreadsheet and add-in.

The STCDO Pricing Engine can be enhanced to support the modeling of bespoke STCDOs with a number of approaches for bespoke portfolio mapping of the base correlation available, including:

• Using the same BC curve as for the standard portfolio
• ATM method
• Probability matching method
• Tranche loss proportion method

Benefits

• Provides a complete, ready-to-use pricing and risk solution for STCDOs.
• GPU-enabled version is 165x faster than serial code, no CUDA or parallel programming expertise needed.
• Delivers a fast entry into the single-tranche CDO market.
• Can be used to cross-check in-house analytics.
• Benefits from a standard Microsoft Excel interface for ease-of-use.

SciFinance - Complete solution for pricing credit derivatives

Need a pricing solution for the full range of credit derivatives? (CDO, CDO squared, CDS, defaultable bonds, etc.) SciFinance automates coding and delivers source code (C/C++) for custom credit derivatives pricing and risk models. Read more