The Art of Credit Derivatives (PDF)

Credit derivatives have been instrumental in the recent increase in
securitization activity. The complex nature and the size of the
market have given rise to very complex counterparty credit
risks. The Lehman failure has shown that these issues can
paralyse the financial markets, and the need for detailed
understanding has never been greater.



The Art of Credit Derivatives shows practitioners how to
put a framework in place which will support the securitization
activity. By showing the models that support this activity
and linking them with very practical examples, the authors show why
a mind-shift within the quant community is needed - a move from
simple modeling to a more hands on mindset where the modeler
understands the trading implicitly.



The book has been written in five parts, covering the modeling
framework; single name corporate credit derivatives; multi name
corporate credit derivatives; asset backed securities and dynamic
credit portfolio management.



Coverage includes:

* groundbreaking solutions to the inherent risks associated with
investing in securitization instruments

* how to use the standardized credit indices as the most
appropriate instruments in price discovery processes and why these
indices are the essential tools for short term credit portfolio
management

* why the dynamics of systemic correlation and the standardised
credit indices are linked with leverage, and consequently the
implications for liquidity and solvability of financial
institutions

* how Lévy processes and long term memory processes are
related to the understanding of economic activity

* why regulatory capital should be portfolio dependant and how to
use stress tests and scenario analysis to model this

* how to put structured products in a mark-to market-environment,
increasing transparency for accounting and compliance.



This book will be invaluable reading for Credit Analysts,
Quantitative Analysts, Credit Portfolio Managers, Academics and
anyone interested in these complex yet important markets.