Full paper available here.
Vladislav Peretyatkin and William Perraudin
Birkbeck College Bank of England
Structured products are complex instruments the payoffs on which depend on the performance of pools of correlated underlying assets and that possess a tranche structure, i.e., a set of rules that prescribe how cash flows on the underlying pool are split between the holders of several classes of claim of different seniorities. This paper describes a methodology we have developed for calculating ratings-based capital charges for structured products like structured exposures. The model we employ is a generalization of industry-standard, ratings-based credit portfolio models.
This version: June 2004
