Credit

Content

• Introduction
• Part I - Credit Risk Management
  • 1 - Overview of Credit Risk
    • 1.1 Components of Credit Risk
    • 1.2 Factors Determining the Credit Risk of a Portfolio
    • 1.3 Traditional Approaches to Managing Credit Risk
    • 1.4 Market Risk versus Credit Risk
    • 1.5 Historical Data
    • 1.6 Example of Default Loss Distribution
    • 1.7 Credit Risk Models
    • 1.8 Conclusion
  • 2 - Exposure Measurement
    • 2.1 Introduction
    • 2.2 Exposure Simulation
    • 2.3 Typical Exposures
    • 2.4 Conclusion
  • 3 - A Framework for Credit Risk Management
    • 3.1 Credit Loss Distribution and Unexpected Loss
    • 3.2 Generating the Loss Distribution
    • 3.3 Example - One Period Model
    • 3.4 Multiple Period Model
    • 3.5 Loan Equivalents
    • 3.6 Conclusion
  • Appendix
    • Derivation of the Formulas for Loan Equivalent Exposures
  • 4 - Extensions of the General Framework
    • 4.1 Analytical Approximations to the Loss Distribution
    • 4.2 Monte Carlo Acceleration Techniques
    • 4.3 Extreme Value Theory
    • 4.4 Marginal Risk
    • 4.5 Portfolio Optimisation
    • 4.6 Conclusion
• Part Ii - Pricing and Hedging of Credit Risk
  • 5 - Credit Derivatives
    • 5.1 Default Swaps, Asset Swaps and Risky Bonds
    • 5.2 Worst-of and Baskets
    • 5.3 Other Credit Contingent Contracts
    • 5.4 Other Products and Exotics
    • 5.5 Conclusion
  • 6 - Pricing Counterparty Risk in Interest Rate Derivatives
    • 6.1 Introduction
    • 6.2 Overview
    • 6.3 Expected Loss versus Economic Capital
    • 6.4 Portfolio Effect
    • 6.5 Market Variables
    • 6.6 Interest Rate Swaps
    • 6.7 Cross Currency Swaps
    • 6.8 Caps and Floors
    • 6.9 Swaptions
    • 6.10 Portfolio Pricing
    • 6.11 Extensions of the Model
    • 6.12 Hedging
    • 6.13 Conclusion
    • Appendices
      • Appendix A - Derivation of the Formula for the Expected Loss on an Interest Rate Swap
      • Appendix B - The Formula for the Expected Loss on an Interest Rate Cap or Floor
      • Appendix C - Derivation of the Formula for the Expected Loss on an Interest Rate Swaption (Hull and White Interest Rate Model)
      • Appendix D - Derivation of the Formula for the Expected Loss on a Cancellable Interest Rate Swap
      • Appendix E - Market Parameters used for the Computations
  • 7 - Credit Risk in Convertible Bonds
    • 7.1 Introduction
    • 7.2 Basic Features of Convertibles
    • 7.3 General Pricing Conditions
    • 7.4 Interest Rate Model
    • 7.5 Firm Value Model
    • 7.6 Credit Spread Model
    • 7.7 "Link" of the two Models
    • 7.8 Hedging of Credit Risk
    • 7.9 Conclusion
    • Appendices
      • Appendix A - Firm Value Model - Analytic Pricing Formulae
      • Appendix B - Derivation of Formulae for Trinomial Tree with Default Branch
      • Appendix C - Effect of Sub-optimal Call Policy
      • Appendix D - Incorporation of "Smile" in the Firm Value Model
  • 8 - Market Imperfections
    • 8.1 Liquidity Risk
    • 8.2 Discrete Hedging
    • 8.3 Asymmetric Information
    • 8.4 Conclusion
• Appendix
  • 1. Credit Swap Valuation Darrel Duffie
  • 2. Practical use of Credit Risk Models in Loan Portfolio and Counterparty Exposure Management Robert A. Jarrow and Donald R. van Deventer
  • 3. An Empirical Analysis of Corporate Rating Migration, Default and Recovery Sean C. Keenan, Lea V. Carty and David T. Hamilton
  • 4. Modelling Credit Migration Bill Demchak
  • 5. Haircuts for Hedge Funds Ray Meadows
  • 6. Generalising with HJM Dmitry Pugachevsky
• Glossary
• Index