The Oxford Handbook of Credit Derivatives

by Lipton, Alexander; Rennie, Andrew

• ISBN13: 9780199546787
• ISBN10: 0199546789
• Format: Hardcover
• Copyright: 2011-03-22
• Publisher: Oxford University Press

Summary

From the late nineties, the spectacular growth of a secondary market for credit through derivatives has been matched by the emergence of mathematical modeling analysing the credit risk embedded in these contracts. This book aims to provide a broad and deep overview of this modeling, covering statistical analysis and techniques, modeling of default of both single and multiple entities, counterparty risk, Gaussian and non-Gaussian modeling, and securitization. Both reduced-form and firm-value models for the default of single entities are considered in detail, with extensive discussion of both their theoretical underpinnings and practical usage in pricing and risk. For multiple entity modeling, the now notorious Gaussian copula is discussed with analysis of its shortcomings, as well as a wide range of alternative approaches including multivariate extensions to both firm-value and reduced form models, and continuous-time Markov chains. One important case of multiple entities modeling--counterparty risk in credit derivatives--is further explored in two dedicated chapters. Alternative non-Gaussian approaches to modelling are also discussed, including extreme-value theory and saddle-point approximations to deal with tail risk. Finally, the recent growth in securitization is covered, including house price modeling and pricing models for asset-backed CDOs. The current credit crisis has brought modeling of the previously arcane credit markets into the public arena. Lipton and Rennie with their excellent team of contributors, provide a timely discussion of the mathematical modeling that underpins both credit derivatives and securitization. Though technical in nature, the pros and cons of various approaches attempt to provide a balanced view of the role that mathematical modeling plays in the modern credit markets. This Handbook will appeal to students and researchers in statistics, economics, and finance, as well as practicioners, credit traders, and quantitative analysts.

Table of Contents

List of Figures	p. ix
List of Tables	p. xviii
List of Contributors	p. xx
Introduction
Non-Technical Introduction	p. 3
Technical Introduction	p. 17
Statistical Overview
Default Recovery Rates and LGD in Credit Risk Modelling and Practice	p. 39
A Guide to Modelling Credit Term Structures	p. 66
Statistical Data Mining Procedures in Generalized Cox Regressions	p. 123
Single and Multi-Name Theory
An Exposition of CDS Market Models	p. 159
Single- and Multi-Name Credit Derivatives: Theory and Practice	p. 196
Marshall-Olkin Copula-Based Models	p. 257
Contagion Models in Credit Risk	p. 285
Markov Chain Models of Portfolio Credit Risk	p. 327
Counterparty Risk in Credit Derivative Contracts	p. 383
Credit Value Adjustment in the Extended Structural Default Model	p. 406
Beyond Normality
A New Philosophy of the Market	p. 467
An EVT primer for credit risk	p. 500
Saddlepoint Methods in Portfolio Theory	p. 533
Securitization
Quantitative Aspects of the Collapse of the Parallel Banking System	p. 573
Home Price Derivatives and Modelling	p. 604
A Valuation Model for ABS CDOs	p. 631
Name Index	p. 657
Subject Index	p. 663
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