In CDO pricing, the cross-correlation coefficients play a significant role as it is the sole parameter used. Criticisms … are levelled around two features of these correlation coefficients: a dependable data is not available to compute the … correlation coefficients between reference obligors; and the same coefficients are used across firms and over the entire life of …

asset return correlations are too low to account for the spreads of index tranches and, thus, point to a large correlation … realized correlations, sheds light on market perceptions of and attitude towards correlation risk. …