Abstract
Using an extensive data set of 15,600 CDS and CDO tranche spreads I conduct an empirical analysis of a Duffie and Garleanu (2001) intensity-based model for correlated defaults. I examine the model with respect to model assumptions, pricing in both the cross section and time series dimension, and hedging ability. The model as- sumptions are found to be reasonable and the model prices and hedges the most risky tranches well. While the model does not capture the variability in senior spreads over time it matches the average spread of senior tranches.
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