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The Oxford Handbook of Credit Derivatives

The Oxford Handbook of Credit Derivatives

Author: Alexander Lipton; Andrew Rennie
Publisher: Oxford University Press
ISBN: 9780199669486
Published In: January 2013
Format: Paperback , 704 pages
Jurisdiction: U.K. ? Disclaimer:
Countri(es) stated herein are used as reference only

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Comprehensive overview of modern credit modelling
Written by the leading academics and practioners, including an introduction by Gillian Tett
Clear and extensive coverage of theory and key equations
A definitive guide to current practice and an excellent reference source for both students and practitioners

From the late nineties, the spectacular growth of a secondary market for credit through derivatives has been matched by the emergence of mathematical modelling analysing the credit risk embedded in these contracts. This book aims to provide a broad and deep overview of this modelling, covering statistical analysis and techniques, modelling of default of both single and multiple entities, counterparty risk, Gaussian and non-Gaussian modelling, and securitisation. 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 modelling, 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 modelling - 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 securitisation is covered, including house price modelling and pricing models for asset-backed CDOs.

The current credit crisis has brought modelling 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 modelling that underpins both credit derivatives and securitisation. Though technical in nature, the pros and cons of various approaches attempt to provide a balanced view of the role that mathematical modelling plays in the modern credit markets. This book will appeal to students and researchers in statistics, economics, and finance, as well as practitioners, credit traders, and quantitative analysts.

Readership: Graduates and researchers in statistics, economics, business, management science, banking, and finance, and practitioners, quantitative analysts, and credit traders.

Part I: Introduction
1: Gillian Tett: Non-technical Introduction
2: Alexander Lipton & Andrew Rennie: Technical Introduction
Part II: Statistical Overview
3: Edward I. Altman: Default Recovery Rates and LGD in Credit Risk Modelling and Practice
4: Arthur M. Berd: A Guide to Modelling Credit Term Structures
5: Zhen Wei: Statistical Data Mining Procedures in Generalized Cox Regressions
Part III: Single and Multi-name Theory
6: Lutz Schloegl: An Exposition of CDS Market Models
7: Alexander Lipton and David Shelton: Single and Multi-name Credit Derivatives: Theory and Practice
8: Youssef Elouerkhaoui: Marshall-Olkin Copula Based Models
9: Mark H. A. Davis: Contagion Models in Credit Risk
10: Tomasz R. Bielecki, Stephane Crepey and Alexander Herbertsson: Markov Chain Models of Portfolio Credit Risk
11: Jon Gregory: Counterparty Risk in Credit Derivative Contracts
12: Alexander Lipton and Artur Sepp: Credit Value Adjustment in the Extended Structural Default Model
Part IV: Beyond Normality
13: Elie Ayache: A New Philosophy of the Market
14: Valerie Chavez-Demoulin and Paul Embrechts: An EVT Primer for Credit Risk
15: Richard J. Martin: Saddlepoint Methods in Portfolio Theory
Part V: Securitzation
16: Alexander Batchvarov: Quantitative Aspects of the Collapse of the Parallel Banking System
17: Alexander Levin: Home Price Derivatives and Modelling
18: Julian Manzano, Vladimir Kamotski, Umberto Pesavento and Alexander Lipton: A Valuation Model for ABS CDOs

Edited by Alexander Lipton, Managing Director, Co-Head of the Quantitative Group, Bank of America Merrill Lynch, London and Visiting Professor of Mathematics, Imperial College, London, UK, and Andrew Rennie, Consulting Partner, Apollinax LLP, London, UK

Contributors:
Edward I. Altman, New York University, USA
Elie Ayache, ITO 33, Paris, France
Alexander Batchvarov, Bank of America, Merrill Lynch, UK
Arthur M. Berd, Capital Fund Management, Paris, France and New York, USA
Tomasz R. Bielecki, Illinois Institute of Technology, USA
Valerie Chavez-Demoulin, Swiss Federal Institute of Technology, Lausanne, Switzerland
Stephane Crepey, Evry University, France
Mark H. A. Davis, Imperial College London, UK
Youssef Elouerkhaoui, Citigroup, London, UK
Paul Embrechts, ETH Zurich, Switzerland
Jon Gregory, Consultant, Ockham Financial Training, UK
Alexander Herbertsson, University of Gothenburg, Sweden
Vladimir Kamotski, Bank of America Merrill Lynch, London, UK
Alexander Levin, Andrew Davidson & Co., Inc. New York, USA
Alexander Lipton, Bank of America, Merrill Lynch, UK
Julian Manzano, Bank of America, Merrill Lynch, UK
Richard J. Martin, AHL, Man Group PLC., London, UK
Umberto Pesavento, Bank of America Merrill Lynch, London, UK
Andrew Rennie, Apollinax LLP, London, UK
Lutz Schloegl, Nomura International, London, UK
Artur Sepp, Bank of America Merrill Lynch in London, UK
David Shelton, Bank of America Merrill Lynch in London, UK
Gillian Tett, Financial Times, London, UK
Zhen Wei, Bank of America Merrill Lynch, Hong Kong

"If ever there was an area in quantitative finance that needed some penetrating light cast on it, it would be the arcane world of credit derivatives. This valuable collection of top-notch contributions from the foremost experts in the field does just that: it illuminates its subject with great clarity and breadth, and deserves to remain a standard reference for years to come. I commend the editors for their selection and organization of topics, and highly recommend this book." - Leif Andersen, Co-head of Global Quant Group, Bank of America Merrill Lynch

"Alex Lipton and Andrew Rennie, seasoned and well-respected experts in the field, have done an excellent job of gathering contributions from some of the best experts in the field to provide a comprehensive overview of existing frameworks and directions of research in credit risk modeling. This handbook provides valuable insights to practitioners, regulators and scholars involved with credit derivatives credit risk management and will doubtlessly become a reference on this topic." - Rama Cont, Associate Professor, Columbia University, New York

"This book provides a wide-ranging survey of the state-of-the-art of credit derivatives. Including contributions from leading practitioners, academics and commentators it describes the theory and practice of these instruments which have reshaped the financial industry in recent years and which have been at the centre of the credit crisis and subsequent banking crises. The material is treated in a technically sophisticated way and covers statistical issues, modelling of single and multi-name credits, counterparty risk, tail risk and securitization. An ideal primer and reference work which gives a comprehensive overview." - Martin Baxter, Nomura International, London