11.6
CDO Curve Trades
PYTHON PLUGIN
Structured
Relative Value
Description
Strategy 11.6: CDO curve flattener/steepener based on spread curve slope vs historical
Strategy Logic
Strategy 11.6: CDO Curve Trades.
Trade the CDO spread curve between short-term and long-term tranches.
* Flattener: sell short-term tranche, buy long-term tranche (expects
the spread curve to flatten).
* Steepener: opposite.
Carry = (M_long * S_long - M_short * S_short) * dt
Signal: compare current curve slope to its historical distribution.
If slope is steep relative to history, enter a flattener (expect
mean-reversion). If slope is flat, enter a steepener.
The trade can be structured as duration-neutral, notional-neutral,
or carry-neutral. Default: duration-neutral.
Required columns: short_term_spread, long_term_spread,
short_term_duration, long_term_duration
Parameters
| Parameter | Default Value | Type |
|---|---|---|
| lookback | 120 | int |
| steep_z | 1.5 | float |
| flat_z | -1.5 | float |
| neutral_mode | duration | str |
Risk Configuration
| Risk Parameter | Value |
|---|---|
| Max Position Pct | 4.0% |
| Stop Loss Pct | 8.0% |
| Take Profit Pct | 10.0% |
| Max Drawdown Pct | 15.0% |