Book description
Credit derivatives have been instrumental in the recent increase in securitization activity. The complex nature and the size of the market have given rise to very complex counterparty credit risks. The Lehman failure has shown that these issues can paralyse the financial markets, and the need for detailed understanding has never been greater.
The Art of Credit Derivatives shows practitioners how to put a framework in place which will support the securitization activity. By showing the models that support this activity and linking them with very practical examples, the authors show why a mind-shift within the quant community is needed - a move from simple modeling to a more hands on mindset where the modeler understands the trading implicitly.
The book has been written in five parts, covering the modeling framework; single name corporate credit derivatives; multi name corporate credit derivatives; asset backed securities and dynamic credit portfolio management.
Coverage includes:
groundbreaking solutions to the inherent risks associated with investing in securitization instruments
how to use the standardized credit indices as the most appropriate instruments in price discovery processes and why these indices are the essential tools for short term credit portfolio management
why the dynamics of systemic correlation and the standardised credit indices are linked with leverage, and consequently the implications for liquidity and solvability of financial institutions
how Lévy processes and long term memory processes are related to the understanding of economic activity
why regulatory capital should be portfolio dependant and how to use stress tests and scenario analysis to model this
how to put structured products in a mark-to market-environment, increasing transparency for accounting and compliance.
This book will be invaluable reading for Credit Analysts, Quantitative Analysts, Credit Portfolio Managers, Academics and anyone interested in these complex yet important markets.
Table of contents
- Title Page
- Copyright Page
- About the Authors
- Acknowledgements
- Preface
- List of Tables
- Table of Figures
- Chapter 1 - Introduction
- Part I - Modeling Framework
- Part II - Single Name Corporate Credit Derivatives
-
Part III - Multiname Corporate Credit Derivatives
- Chapter 7 - Collateralized Debt Obligations
- Chapter 8 - Standardized Credit Indices
- Chapter 9 - Pricing Synthetic CDO Tranches
- Chapter 10 - Historical Study of Lévy Base Correlation
- Chapter 11 - Base Expected Loss and Base Correlation Smile
- Chapter 12 - Base Correlation Mapping
- Chapter 13 - Correlation from Collateral to Tranches
- Chapter 14 - Cash Flow CDOs
- Chapter 15 - Structured Credit Products: CPPI and CPDO
- Part IV - Asset Backed Securities
- Part V - Dynamic Credit Portfolio Management
- Chapter 24: Conclusion
- Appendix A - Economic Capital Allocation Approaches
- Appendix B - Generalized Gauss Laguerre Quadrature
- References
- Index
Product information
- Title: The Art of Credit Derivatives: Demystifying the Black Swan
- Author(s):
- Release date: January 2010
- Publisher(s): Wiley
- ISBN: 9780470747353
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