TY - JOUR T1 - On Pricing CDOs with Meixner Distributions JF - The Journal of Fixed Income SP - 86 LP - 99 DO - 10.3905/jfi.2008.708845 VL - 18 IS - 1 AU - Kridsda Nimmanunta AU - Anant Chiarawongse AU - Sunti Tirapat Y1 - 2008/06/30 UR - https://pm-research.com/content/18/1/86.abstract N2 - This article provides an alternative framework to price Collateralized Debt Obligations (CDOs) based on a special case of Lévy distributions called a Meixner distribution. The proposed distribution has desirable properties such as skewness and fat tails. More importantly, it is relatively simple to implement compared to other Lévy distributions and is applicable to both copula-based and structural form approaches. Using the historical prices of CDOs on the CDX NA IG, we examine the performances of the proposed models in comparison to those of standard models such as Gaussian copula model, double-t copula model, and correlated Brownian motion structural model. In terms of the mean absolute pricing errors (MAPEs), Meixner-based models outperform standard models. We also examine the risk measures of the models and find that the risk measures from Meixner-based models are more reasonable than those of the standard models.TOPICS: CLOs, CDOs, and other structured credit, statistical methods, VAR and use of alternative risk measures of trading risk ER -