Modelling Single-Name and Multi-name Credit Derivatives.
Dominic. O'Kane
Bok Engelsk 2008 · Electronic books.
| Omfang | 1 online resource (515 pages)
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|---|---|
| Utgave | 1st ed.
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| Opplysninger | Intro -- Modelling Single-name and Multi-name Credit Derivatives -- Contents -- Acknowledgements -- About the Author -- Introduction -- Notation -- 1 The Credit Derivatives Market -- 1.1 Introduction -- 1.2 Market Growth -- 1.3 Products -- 1.4 Market Participants -- 1.5 Summary -- 2 Building the Libor Discount Curve -- 2.1 Introduction -- 2.2 The Libor Index -- 2.3 Money Market Deposits -- 2.4 Forward Rate Agreements -- 2.5 Interest Rate Futures -- 2.6 Interest Rate Swaps -- 2.7 Bootstrapping the Libor Curve -- 2.8 Summary -- 2.9 Technical Appendix -- PART I SINGLE-NAME CREDIT DERIVATIVES -- 3 Single-name Credit Modelling -- 3.1 Introduction -- 3.2 Observing Default -- 3.3 Risk-neutral Pricing Framework -- 3.4 Structural Models of Default -- 3.5 Reduced Form Models -- 3.6 The Hazard Rate Model -- 3.7 Modelling Default as a Cox Process -- 3.8 A Gaussian Short Rate and Hazard Rate Model -- 3.9 Independence and Deterministic Hazard Rates -- 3.10 The Credit Triangle -- 3.11 The Credit Risk Premium -- 3.12 Summary -- 3.13 Technical Appendix -- 4 Bonds and Asset Swaps -- 4.1 Introduction -- 4.2 Fixed Rate Bonds -- 4.3 Floating Rate Notes -- 4.4 The Asset Swap -- 4.5 The Market Asset Swap -- 4.6 Summary -- 5 The Credit Default Swap -- 5.1 Introduction -- 5.2 The Mechanics of the CDS Contract -- 5.3 Mechanics of the Premium Leg -- 5.4 Mechanics of the Protection Leg -- 5.5 Bonds and the CDS Spread -- 5.6 The CDS-Cash basis -- 5.7 Loan CDS -- 5.8 Summary -- 6 A Valuation Model for Credit Default Swaps -- 6.1 Introduction -- 6.2 Unwinding a CDS Contract -- 6.3 Requirements of a CDS Pricing Model -- 6.4 Modelling a CDS Contract -- 6.5 Valuing the Premium Leg -- 6.6 Valuing the Protection Leg -- 6.7 Upfront Credit Default Swaps -- 6.8 Digital Default Swaps -- 6.9 Valuing Loan CDS -- 6.10 Summary -- 7 Calibrating the CDS Survival Curve -- 7.1 Introduction.. - 13.7 Calibrating the Correlation -- 13.8 Summary -- 14 Modelling Default Times using Copulas -- 14.1 Introduction -- 14.2 Definition and Properties of a Copula -- 14.3 Measuring Dependence -- 14.4 Rank Correlation -- 14.5 Tail Dependence -- 14.6 Some Important Copulae -- 14.7 Pricing Credit Derivatives from Default Times -- 14.8 Standard Error of the Breakeven Spread -- 14.9 Summary -- 14.10 Technical Appendix -- 15 Pricing Default Baskets -- 15.1 Introduction -- 15.2 Modelling First-to-default Baskets -- 15.3 Second-to-default and Higher Default Baskets -- 15.4 Pricing Baskets using Monte Carlo -- 15.5 Pricing Baskets using a Multi-Factor Model -- 15.6 Pricing Baskets in the Student-t Copula -- 15.7 Risk Management of Default Baskets -- 15.8 Summary -- 16 Pricing Tranches in the Gaussian Copula Model -- 16.1 Introduction -- 16.2 The LHP Model -- 16.3 Drivers of the Tranche Spread -- 16.4 Accuracy of the LHP Approximation -- 16.5 The LHP Model with Tail Dependence -- 16.6 Summary -- 16.7 Technical Appendix -- 17 Risk Management of Synthetic Tranches -- 17.1 Introduction -- 17.2 Systemic Risks -- 17.3 The LH+ Model -- 17.4 Idiosyncratic Risks -- 17.5 Hedging Tranches -- 17.6 Summary -- 17.7 Technical Appendix -- 18 Building the Full Loss Distribution -- 18.1 Introduction -- 18.2 Calculating the Tranche Survival Curve -- 18.3 Building the Conditional Loss Distribution -- 18.4 Integrating over the Market Factor -- 18.5 Approximating the Conditional Portfolio Loss Distribution -- 18.6 A Comparison of Methods -- 18.7 Perturbing the Loss Distribution -- 18.8 Summary -- 19 Implied Correlation -- 19.1 Introduction -- 19.2 Implied Correlation -- 19.3 Compound Correlation -- 19.4 Disadvantages of Compound Correlation -- 19.5 No-arbitrage Conditions -- 19.6 Summary -- 20 Base Correlation -- 20.1 Introduction -- 20.2 Base Correlation.. - 20.3 Building the Base Correlation Curve -- 20.4 Base Correlation Interpolation -- 20.5 Interpolating Base Correlation using the ETL -- 20.6 A Base Correlation Surface -- 20.7 Risk Management of Index Tranches -- 20.8 Hedging the Base Correlation Skew -- 20.9 Base Correlation for Bespoke Tranches -- 20.10 Risk Management of Bespoke Tranches -- 20.11 Summary -- 21 Copula Skew Models -- 21.1 Introduction -- 21.2 The Challenge of Fitting the Skew -- 21.3 Calibration -- 21.4 Random Recovery -- 21.5 The Student-t Copula -- 21.6 The Double-t Copula -- 21.7 The Composite Basket Model -- 21.8 The Marshall-Olkin Copula -- 21.9 The Mixing Copula -- 21.10 The Random Factor Loading Model -- 21.11 The Implied Copula -- 21.12 Copula Comparison -- 21.13 Pricing Bespokes -- 21.14 Summary -- 22 Advanced Multi-name Credit Derivatives -- 22.1 Introduction -- 22.2 Credit CPPI -- 22.3 Constant Proportion Debt Obligations -- 22.4 The CDO-squared -- 22.5 Tranchelets -- 22.6 Forward Starting Tranches -- 22.7 Options on Tranches -- 22.8 Leveraged Super Senior -- 22.9 Summary -- 23 Dynamic Bottom-up Correlation Models -- 23.1 Introduction -- 23.2 A Survey of Dynamic Models -- 23.3 The Intensity Gamma Model -- 23.4 The Affine Jump Diffusion Model -- 23.5 Summary -- 23.6 Technical Appendix -- 24 Dynamic Top-down Correlation Models -- 24.1 Introduction -- 24.2 The Markov Chain Approach -- 24.3 Markov Chain: Initial Generator -- 24.4 Markov Chain: Stochastic Generator -- 24.5 Summary -- Appendix A Useful Formulae -- Bibliography -- Index.. - 7.2 Desirable Curve Properties -- 7.3 The Bootstrap -- 7.4 Interpolation Quantities -- 7.5 Bootstrapping Algorithm -- 7.6 Behaviour of the Interpolation Scheme -- 7.7 Detecting Arbitrage in the Curve -- 7.8 Example CDS Valuation -- 7.9 Summary -- 8 CDS Risk Management -- 8.1 Introduction -- 8.2 Market Risks of a CDS Position -- 8.3 Analytical CDS Sensitivities -- 8.4 Full Hedging of a CDS Contract -- 8.5 Hedging the CDS Spread Curve Risk -- 8.6 Hedging the Libor Curve Risk -- 8.7 Portfolio Level Hedging -- 8.8 Counterparty Risk -- 8.9 Summary -- 9 Forwards, Swaptions and CMDS -- 9.1 Introduction -- 9.2 Forward Starting CDS -- 9.3 The Default Swaption -- 9.4 Constant Maturity Default Swaps -- 9.5 Summary -- PART II MULTI-NAME CREDIT DERIVATIVES -- 10 CDS Portfolio Indices -- 10.1 Introduction -- 10.2 Mechanics of the Standard Indices -- 10.3 CDS Portfolio Index Valuation -- 10.4 The Index Curve -- 10.5 Calculating the Intrinsic Spread of an Index -- 10.6 The Portfolio Swap Adjustment -- 10.7 Asset-backed and Loan CDS Indices -- 10.8 Summary -- 11 Options on CDS Portfolio Indices -- 11.1 Introduction -- 11.2 Mechanics -- 11.3 Valuation of an Index Option -- 11.4 An Arbitrage-free Pricing Model -- 11.5 Examples of Pricing -- 11.6 Risk Management -- 11.7 Black's Model Revisited -- 11.8 Summary -- 12 An Introduction to Correlation Products -- 12.1 Introduction -- 12.2 Default Baskets -- 12.3 Leveraging the Spread Premia -- 12.4 Collateralised Debt Obligations -- 12.5 The Single-tranche Synthetic CDO -- 12.6 CDOs and Correlation -- 12.7 The Tranche Survival Curve -- 12.8 The Standard Index Tranches -- 12.9 Summary -- 13 The Gaussian Latent Variable Model -- 13.1 Introduction -- 13.2 The Model -- 13.3 The Multi-name Latent Variable Model -- 13.4 Conditional Independence -- 13.5 Simulating Multi-name Default -- 13.6 Default Induced Spread Dynamics.. - Modelling Single-name and Multi-name Credit Derivatives presents an up-to-date, comprehensive, accessible and practical guide to the pricing and risk-management of credit derivatives. It is both a detailed introduction to credit derivative modelling and a reference for those who are already practitioners. This book is up-to-date as it covers many of the important developments which have occurred in the credit derivatives market in the past 4-5 years. These include the arrival of the CDS portfolio indices and all of the products based on these indices. In terms of models, this book covers the challenge of modelling single-tranche CDOs in the presence of the correlation skew, as well as the pricing and risk of more recent products such as constant maturity CDS, portfolio swaptions, CDO squareds, credit CPPI and credit CPDOs.
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| Emner | |
| Sjanger | |
| Dewey | |
| ISBN | 9780470696767
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| ISBN(galt) |
