Managing Synthetic CDO Tranches using Base Correlations
Managing Synthetic CDO Tranches using Base Correlations
Managing Synthetic CDO Tranches using Base Correlations
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<strong>Base</strong> correlation as a risk factor<br />
Volatility versus price level<br />
<br />
iTraxx Europe (Jan-05 to Sept-07)<br />
Vol from absolute difference<br />
Vol from relative difference<br />
0.025<br />
0.1<br />
0.09<br />
0.02<br />
0.08<br />
0.07<br />
0.015<br />
0.06<br />
0.01<br />
0.005<br />
0.05<br />
0.04<br />
0.03<br />
0.02<br />
0<br />
0.1 0.15 0.2 0.25<br />
0.01<br />
0.1 0.15 0.2 0.25<br />
21
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