Speed Up Optimization for CDO Design Method Conformed to Investor Needs

T. Nakae, K. Baba, T. Moritsu, and N. Komoda (Japan)


risk management, collateralized debt obligation, investor needs, speed up optimization


In this paper we propose a speeding up method of needs based CDO (Collateralized Debt Obligation), which meets investor needs of attributes of CDO. We note the fact that the computing time to derive the best CDO is proportional to the number of candidates of the best CDO which are gen erated by changing contract conditions in a certain band. Elucidating the relationship between the change of con tract condition and the objective function analytically, and grouping candidates that have the same merchantability ob served from the standpoint of investors, we reduces redun dant generation of the candidates. The comparative experi ment indicates that the proposed method makes it possible to double the kinds of tranches or to rise the calculation accuracy nearly sixfold keeping immediacy of calculation.

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