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date: 17 July 2019

Abstract and Keywords

This article develops a pricing model for asset-backed securities collateralised debt obligation tranches backed by mortgage collateral (including prime, sub-prime, and other property types) via the Monte Carlo method. It is organized as follows. Section 2 presents a brief historical overview of the sub-prime market. Section 3 provides the core technical description of the scenario generator. After the stochastic model is established in Section 4, the calibration procedure is presented. Section 5 and 6 discuss results and conclusions, respectively.

Keywords: pricing model, asset-backed securities, collateralised debt obligation, mortgage collateral, Monte Carlo method, sub-prime market

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