SciComp Dives into Large Pool

The newly released enhancements in SciSTCDO version 2.0 include implementation of base correlations within the Large Pool Gaussian Copula Model (Large Pool Model) and additional calibration functionality. The Large Pool Model is a quick, user-friendly model for valuing CDO structures that requires a minimal amount of data; the newly released enhancements complement the existing analytic capabilities of SciSTCDO's high performance Monte Carlo method and a fast, specialized semi-analytic approach. The trio of pricing approaches provide users alternative valuation methodologies and cross-checking capabilities for both prices and risk measures.

Curt Randall, Executive Vice President for SciComp said, "The Large Pool Model with base correlations is a commonly used, fast and transparent pricing approach that lets both buy side and sell side clients quickly perform consistency checks on market prices."

The two new modules include the Base Correlation Calibrator, that calculates the implied correlation for the given tranche spreads, and the Base Correlation Pricer, a pricing and risk engine that calculates present value, implied spread and risky duration for both market observable and off-market tranches. Both new modules enjoy the speed and tractability of the Homogeneous Large Pool Gaussian Copula model.

This article appeared in Wilmott Magazine.