STCDO Pricing Engine

The STCDO (single-tranche collateralized debt obligation) Pricing Engine employs a Gaussian copula framework with stochastic recovery, semi-analytic method, including an internal credit default swap (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:

  • 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.
  • GPU-enabled— takes advantage of NVIDIA graphics processors and delivers much faster accelerations than serial code. No CUDA or parallel programming expertise needed.

Single-tranche CDO Pricing Engine 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)
Single Tranche CDO pricing

Like all SciComp Consulting 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

STCDO Pricer

STCDO Pricing Engine

STCDO Calculator

STCDO Calibrator

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