Credit

Jon Gregory and Angelo Arvanitis edited it.

• Emphasises fixed income instruments rather than loans, where stochastic future exposures are modelled accurately
• Provides a thorough analysis of the pricing and hedging of basket credit derivatives and other credit contingent products
• Examines loans, credit derivatives, interest rate derivatives with risky counterparties and convertible bonds
• Adapts credit derivative modelling techniques in order to price and hedge the credit component in fixed income derivatives
• It provides a practical discussion of market frictions that impact credit trading
• Complex theoretical issues are illustrated with an unusually high number of examples, tables and figures that have been designed with the practitioner in mind
• Proofs and technicalities are discussed in the appendices of each chapter

TABLE OF CONTENTS

The introduction is about something.

Credit risk management is part I.

There is an overview of credit risk.

There are components of credit risk.

The credit risk of a portfolio is determined by factors.

There are traditional approaches to managing credit risk.

Market risk is riskier than credit risk.

There are 1.5 historical data.

There is a Default Loss Distribution example.

Credit risk models.

Conclusion

Exposure measurement

The introduction

Exposure Simulation 2.2

2.3 typical exposure

Conclusion

A framework for credit risk management.

Credit Loss Distribution and Unexpected Loss are related.

The loss distribution is generated.

The one period model is an example.

There is a multiple period model.

3.5 loan equivalents

Conclusion 3.6

Appendix

The Formulas for Loan Equivalent Exposures wereDerived.

Extensions of the general framework.

Approximations of the loss distribution

Monte Carlo Acceleration Techniques are used.

Extreme value theory.

There is a Marginal Risk.

Portfolio Optimisation is 4.5

Conclusion

The second part deals with hedging credit risk.

Credit derivatives are included.

There are default swaps, asset swaps and risky bonds.

Worst-of and Baskets.

There are other credit contingent contracts.

There are other products and exotics.

Conclusion

Pricing Counterparty Risk in Interest Rate Derivatives.

The introduction

There is a 6.2 overview.

The expected loss is compared to economic capital.

Portfolio effect

There are market variables.

There are interest rate swaps.

There are cross currency swaps.

There are 6.8 caps and floors.

6.9 swaps

Portfolio Pricing is 6.10

The model has extensions.

Hedging is 6.12

The conclusion was 6.13

Credit risk in convertible bonds.

The introduction

There are basic features of convertibles.

General pricing conditions

The interest rate model is 7.4

There is a firm value model.

A credit spread model.

The two models have the same name.

Credit riskdging

The conclusion of 7.9.

There are Market Imperfections.

There is a risk of Liquidity Risk.

Hedging is done in Discrete Hedging.

There is asymmetric information.

Conclusion

Risk Books, Angelo Arvanitis and Jon Gregory are available at nextskillup.com.