RT Journal Article
SR Electronic
T1 ABSTRAK and the Greeks: <em>The Mathematics of Valuing Structured Securities in the Secondary Market</em>
JF The Journal of Structured Finance
FD Institutional Investor Journals
SP 42
OP 50
DO 10.3905/jsf.2011.17.3.042
VO 17
IS 3
A1 Iuliia Palamar
A1 David Abitbol
A1 Ann Rutledge
A1 Sylvain Raynes
YR 2011
UL https://pm-research.com/content/17/3/42.abstract
AB Since the publication of U.S. SEC Regulation AB in 2005, the securitization market has made substantial progress in accepting the need to standardize collateral data. However, to revive the market, the valuation framework for ABS, RMBS, and their derivatives also needs to be standardized. The authors argue that the most data-responsive valuation framework for structured securities is based not on Black–Scholes (where the risk analysis is circular, being reliant on ratings) but on classical fixed income mathematics—both the price of a bond and Taylor series approximations—with an adjustment for endogenous shifts in the credit quality of seasoning structured securities.TOPICS: Options, interest-rate and currency swaps