The Oxford Handbook of Credit Derivatives

Paperback | February 17, 2013

EditorAlexander Lipton, Andrew Rennie

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From the late 1990s, 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, coveringstatistical 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 analysisof 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 intwo 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 forasset-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. Thoughtechnical 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, credittraders, and quantitative analysts

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From the late 1990s, 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, coveringstatistical analysis and techniques, modelling...

Alexander Lipton is a Managing Director and Co-Head of the Global Quantitative Group at Bank of America Merrill Lynch, and Visiting Professor of Mathematics at Imperial College. Prior to his current role, he was Managing Director and Head of Capital Structure Quantitative Research at Citadel Investment Group in Chicago. He has also wo...

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Format:PaperbackDimensions:704 pages, 9.69 × 6.73 × 0.68 inPublished:February 17, 2013Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0199669481

ISBN - 13:9780199669486

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Table of Contents

Part I: Introduction1. Gillian Tett: Non-technical Introduction2. Alexander Lipton and Andrew Rennie: Technical IntroductionPart II: Statistical Overview3. Edward I. Altman: Default Recovery Rates and LGD in Credit Risk Modelling and Practice4. Arthur M. Berd: A Guide to Modelling Credit Term Structures5. Zhen Wei: Statistical Data Mining Procedures in Generalized Cox RegressionsPart III: Single and Multi-name Theory6. Lutz Schloegl: An Exposition of CDS Market Models7. Alexander Lipton and David Shelton: Single and Multi-name Credit Derivatives: Theory and Practice8. Youssef Elouerkhaoui: Marshall-Olkin Copula Based Models9. Mark H. A. Davis: Contagion Models in Credit Risk10. Tomasz R. Bielecki, Stephane Crepey and Alexander Herbertsson: Markov Chain Models of Portfolio Credit Risk11. Jon Gregory: Counterparty Risk in Credit Derivative Contracts12. Alexander Lipton and Artur Sepp: Credit Value Adjustment in the Extended Structural Default ModelPart IV: Beyond Normality13. Elie Ayache: A New Philosophy of the Market14. Valerie Chavez-Demoulin and Paul Embrechts: An EVT Primer for Credit Risk15. Richard J. Martin: Saddlepoint Methods in Portfolio TheoryPart V: Securitzation16. Alexander Batchvarov: Quantitative Aspects of the Collapse of the Parallel Banking System17. Alexander Levin: Home Price Derivatives and Modelling18. Julian Manzano, Vladimir Kamotski, Umberto Pesavento and Alexander Lipton: A Valuation Model for ABS CDOs

Editorial Reviews

"Most chapters in the handbook are rigorously written with comprehensive literature reviews and self-contained technical details. With a big picture of the recent credit crisis, this handbook aims to provide an up-to-date quantitative perspective and a detailed toolbox for modelling creditderivatives. The editors and contributors have achieved their goal. This handbook should be on the shelf of every serious researcher and practitioner for reference on credit derivative modelling. I recommend this book without hesitation." --Long Kang, Journal of Applied Statistics