The purpose of this project is to research, develop and implement superior methods for managing credit derivatives, from single name instruments to complex structured products.
Postdoctoral fellow: Dr. Lung Kwan Tsui, Department of Statistics and Actuarial Science, University of Waterloo
Lead faculty member: Dr. David Saunders, Department of Statistics and Actuarial Science, University of Waterloo
The consequences of the mismanagement of credit risk and mispricing of structured credit portfolios are notorious. The purpose of this project is to research, develop and implement superior methods for managing credit derivatives, from single name instruments such as credit default swaps to complex structured products, such as mortgage-backed securities and collateralized debt obligations. The algorithms investigated will employ a bottom-up approach, based on realistic modeling of the underlying collateral instruments (e.g. mortgages). Shortcomings of prior approaches, such as contradictory simplifying assumptions, and inconsistent treatment of different market segments, will be avoided. The project will help the partner organization maintain and augment its position as an industry leader in the research and development of the application of quantitative techniques to credit portfolios. During the project, the partner organization will be able to investigate models at the frontiers of current research, and develop new models that will expand these frontiers.