Abstract
A crucial need for Hedge Funds Investors is bridge financing loans. As the market leader servicing the alternative world, Citco, through its Financial Products division (CFP), provides those credit facilities via a very sophisticated securitization platform. More precisely, CFP issues rated notes backed by loans granted to Hedge Funds Investors; each loan being collateralized by the Hedge Fund shares. Moody's Investor Service rates those tranches using a simple Monte Carlo simulation where the NAV's portfolio is assumed to follow a Multivariate Geometric Brownian Motion, a very strong assumption. In this Master Thesis, we merge the theories of Levy processes, copulas and extreme values to define a new tailored-made multivariate stochastic process that will eventually model the portfolio of Hedge Funds, taking thus into account (hierarchical dependents) jumps and extreme events, two essential features for both modeling financial assets and securitization.
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