Estimating CDO Expected Losses via a Monte Carlo Simulation

Estimating CDO Expected Losses via a Monte Carlo Simulation

  • This model illustrates the mechanics of a CDO transaction  ;
  • Starting from PD, EAD, and LGD at the loan level, we simulate the Expected Loss per CDO tranche ;
  • Since the Monte Carlo simulation requires a random factor, one uses a dedicated built-in function. A robustness check is performed to cross-check the randomness of the factor ;
  • A brief methodology is available in the spreadsheet.

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Estimating CDO Expected Losses via a Mon
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