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Credit Risk

Models, Derivatives, and Management

Edited by Niklas Wagner

Series Editor: M.A.H. Dempster, Rama Cont

Published May 28th 2008 by Chapman and Hall/CRC – 600 pages

Series: Chapman & Hall/CRC Financial Mathematics Series

Purchasing Options:

  • Hardback: 978-1-58488-994-6: $107.95 Add to Cart
  • eBook: 978-1-58488-995-3:
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Description

Featuring contributions from leading international academics and practitioners, Credit Risk: Models, Derivatives, and Management illustrates how a risk management system can be implemented through an understanding of portfolio credit risks, a set of suitable models, and the derivation of reliable empirical results.

Divided into six sections, the book

• Explores the rapidly developing area of credit derivative products, including iTraxx Futures, iTraxx Default Swaptions, and constant proportion debt obligations

• Addresses the relationships between the DJ iTraxx credit default swap (CDS) index and the stock market as well as CDS spreads and macroeconomic factors

• Investigates systematic and firm-specific default risk factors, compares CDS pricing results from the CreditGrades industry benchmark to a trinomial tree approach, and applies the Hull–White intensity-based model to the pricing of names from the CDX index

• Analyzes aggregate default and recovery rates on corporate bond defaults over a twenty-year period, the responses of hazard rates to changes in a set of economic variables, low-default portfolios, and tests on the accuracy of the Basel II framework

• Describes benchmark models of implied credit correlation risk, copula-based default dependence concepts, the fit of various copula models, and a common factor model of systematic credit risk

• Studies the pricing of options on single-name CDSs, the pricing of credit derivatives, collateralized debt obligation (CDO) price data, the pricing of CDO tranches, applications of Gaussian and Student’s t copula functions, and the pricing of CDOs

Using mathematical models and methodologies, this volume provides the essential knowledge to properly manage credit risk and make sound financial decisions.

Reviews

“Credit Risk: Models, Derivatives, and Management is the most comprehensive available volume of authoritative readings on credit risk modeling. Niklas Wagner has given us a package of 26 chapters by well-recognized authors, treating all major aspects of the subject, from the behavior of default probabilities, recovery, and correlation to the pricing of a wide range of single-name and multi-name credit products. Every practitioner covering the topic will appreciate access to this collection.”

—Darrell Duffie, Dean Witter Distinguished Professor of Finance, The Graduate School of Business, Stanford University, California, USA

"Well-recognized academics and industry experts offer their perspectives on current advances in credit risk modeling, pricing, and management . . . contains a nice mixture of theoretical and empirical contributions. In view of the current U.S. subprime mortgage loan crisis, CDO-based credit problems and several bankruptcies of financial institutions, this book is highly topical and offers valuable tools to both academics and practitioners alike."

– Giacomo Bonanno, in Zentralblatt Math, 2009

Contents

Preface A View on Credit Derivatives

Single Name Credit Default Swap Valuation: An Introductory Review

Anouk G.P. Claes and Marc J.K. De Ceuster

Valuation of Credit Derivatives with Counterparty Risk

Volker Läger, Andreas Oehler, Marco Rummer, and Dirk Schiefer

Integrated Credit Portfolio Management: A Preview

Jochen Felsenheimer and Philip Gisdakis

Credit Default Swaps and an Application to the Art Market: A Proposal

Rachel A.J. Campbell and Christian Wiehenkamp

Credit Risk, Spreads, and Spread Determinants

Credit Default Swaps and Equity Prices: The iTraxx CDS Index Market

Hans Byström

The Determinants of CDS Prices: An Industry-Based Investigation

Danielle Sougné, Cédric Heuchenne, and Georges Hübner

Credit Spread Dynamics: Evidence from Latin America

Kannan Thuraisamy, Gerry Gannon, and Jonathan A. Batten

Accounting Data Transparency and Credit Spreads: Clinical Studies

Umberto Cherubini

Anticipating Credit Events Using Credit Default Swaps: An Application to Sovereign Debt Crises

Jorge Antonio Chan-Lau

Credit Risk Modeling and Pricing

Investigating the Role of Systematic and Firm-Specific Factors in Default Risk: Lessons from Empirically Evaluating Credit Risk Models

Gurdip Bakshi, Dilip Madan, and Frank Xiaoling Zhang

Pricing CDX Credit Default Swaps with CreditGrades and Trinomial Trees

Christian Stewart and Niklas Wagner

Pricing CDX Credit Default Swaps Using the Hull–White Model

Bastian Hofberger and Niklas Wagner

Default Risk, Recovery Risk, and Rating

The Link between Default and Recovery Rates: Theory, Empirical Evidence, and Implications

Edward I. Altman, Brooks Brady, Andrea Resti, and Andrea Sironi

Business and Financial Indicators: What Are the Determinants of Default Probability Changes?

Fabien Couderc, Olivier Renault, and Olivier Scaillet

Managing Credit Risk for Retail Low-Default Portfolios

Gabriele Sabato

Tests on the Accuracy of Basel II

Simone Varotto

Credit Risk Dependence and Dependent Defaults

Correlation Risk: What the Market Is Telling Us and Does It Make Sense?

Vineer Bhansali

Copula-Based Default Dependence Modeling: Where Do We Stand?

Elisa Luciano

Correlated Default Processes: A Criterion-Based Copula Approach

Sanjiv R. Das and Gary Geng

Systematic Credit Risk: CDX Index Correlation and Extreme Dependence

Sofiane Aboura and Niklas Wagner

Options, Portfolios, and Pricing Loss Distribution Tranches

CDS Options through Candidate Market Models and the CDS-Calibrated CIR++ Stochastic Intensity Model

Damiano Brigo

Arbitrage Pricing of Credit Derivatives

Siu Lam Ho and Lixin Wu

An Empirical Analysis of CDO Data

Vincent Leijdekker, Martijn van der Voort, and Ton Vorst

Pricing Tranched Credit Products with Generalized Multifactor Models

Manuel Moreno, Juan I. Peña, and Pedro Serrano

CDO Prices and Risk Management: A Comparative Study of Alternative Approaches for Pricing iTraxx

Jean-Michel Bourdoux, Georges Hübner, and Jean-Roch Sibille

Numerical Pricing of CDOs: A Monte Carlo Approach

Manuel Moreno and Pedro Serrano

Index

Name: Credit Risk: Models, Derivatives, and Management (Hardback) – Chapman and Hall/CRC 
Description: Edited by Niklas WagnerSeries Editor: M.A.H. Dempster, Rama Cont. Featuring contributions from leading international academics and practitioners, Credit Risk: Models, Derivatives, and Management illustrates how a risk management system can be implemented through an understanding of portfolio credit risks, a set of...
Categories: Finance, Statistics, Financial Mathematics