Borowski, Mateusz (2014) A Large Market Model with Stochastic Volatility and Application to Pricing Credit Derivatives. Masters thesis, Oxford University.

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Abstract
We investigate a Large Market Model with Stochastic Volatility given by Heston dynamics. We introduce two correlated market drivers: one corresponding to the assets and one corresponding to the volatilities. By passing to the limit with the number of assets, we derive a Stochastic Partial Differential Equation (SPDE) governing the behaviour of the two dimensional limit density. We define the loss process as a functional of this density. We discretize the SPDE in order to price selected complex credit derivatives: Single Tranche Collateralized Debt Obligations (CDOs) and Forward Start CDOs. We study the impact of varying model parameters on the loss process and the pricing.
Item Type:  Thesis (Masters) 

Subjects:  H  N > Mathematics education 
Research Groups:  Mathematical and Computational Finance Group 
ID Code:  1844 
Deposited By:  Laura Auger 
Deposited On:  07 Aug 2014 07:00 
Last Modified:  29 May 2015 19:32 
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