Levy Processes in Credit Risk / Wiley Finance Series (ePub)

This book is an introductory guide to using Lévy processes for
credit risk modelling. It covers all types of credit derivatives:
from the single name vanillas such as Credit Default Swaps (CDSs)
right through to structured credit risk products such as
Collateralized Debt Obligations (CDOs), Constant Proportion
Portfolio Insurances (CPPIs) and Constant Proportion Debt
Obligations (CPDOs) as well as new advanced rating models for Asset
Backed Securities (ABSs).

Jumps and extreme events are crucial stylized features,
essential in the modelling of the very volatile credit markets -
the recent turmoil in the credit markets has once again illustrated
the need for more refined models.

Readers will learn how the classical models (driven by Brownian
motions and Black-Scholes settings) can be significantly improved
by using the more flexible class of Lévy processes. By doing
this, extreme event and jumps can be introduced into the models to
give more reliable pricing and a better assessment of the
risks.

The book brings in high-tech financial engineering models for
the detailed modelling of credit risk instruments, setting up the
theoretical framework behind the application of Lévy Processes
to Credit Risk Modelling before moving on to the practical
implementation. Complex credit derivatives structures such as CDOs,
ABSs, CPPIs, CPDOs are analysed and illustrated with market
data.