PRINT THIS PAGE Risk and valuation of collaterised debt obligation03/10/2001. Source: Darrell Duffie and Nicolae Garleanu. 
 Private equity firms in the US have been pricing collateralised debt obligation for many years and now European firms are following suit. This paper by Darrell Duffie and Nicolae Garleanu of Stanford University studies the risk analysis and market valuation of this highly complex debt investment.
In perfect markets, CDOs would serve no purpose as they are very expensive to construct and market. However, in practice CDOs address some important market imperfections. The authors illustrate the effects of correlation on CDOs and prioritisation for the market valuation, diversity score and the risks of CDOs.
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Copyright © Stamford University 2001
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