This book was conceived just after financial markets had experienced one of the most severe shocks ever. Credit risk and credit derivatives were at the center of the crisis. It is generally agreed that the subprime crisis originated largely with very classical phenomena, including market bubbles (especially in real estate); general underpricing of risk, partly due to macroeconomic choices (such as low risk-free rates); and fraudulent behaviors in the issuance of mortgages and weaknesses in the originate-to-distribute system, to give some examples. Besides this, it has become very clear that there are serious problems in general with credit risk modeling and credit derivatives in particular: their pricing, their conception, and their ...

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