Kamakura Corporation: CDO Correlation: Reversal of Fortune

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HONOLULU, HI (MARKET WIRE) Kamakura Corporation released an important research paper on collateralized debt valuation that proves a common market assumption about correlations can lead to dramatically incorrect CDO valuations. The study, authored by Kamakura's Professor Robert A. Jarrow and Dr. Donald R. van Deventer, is a companion piece to the Kamakura CDO study released in December. The new paper, "Synthetic CDO Equity: Long or Short Correlation Risk?" addresses the common CDO market assumption that an increase in the correlation of defaults increases the value of the equity tranches of CDOs. Since banks

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