We extend the model presented in Bonollo et al. by introducing a multiscenario framework that allows for a richer and more realistic specification, including non-static (stochastic) probabilities of default and losses given default. Though more complex from a computational point of view, the...

In the current markets, options with different strikes or maturities are usually priced with different implied volatilities. This stylized fact, which is commonly referred to asfsmile effect, can be accommodated by resorting to specific models, either for pricing exotic derivatives or for...

We try and apply the single-scenario version of the general model in Castagna, Mercurio and Mosconi (2010) to the pricing of CDOs. We are able to establish a unified approach to both evaluate the Credit VaR and the risk of structured products, and thus evaluate on a consistent and uniform basis...