Levy Processes in Credit Risk

Levy Processes in Credit Risk

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This book is an introductory guide to using LAcvy 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 LAcvy 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 LAcvy 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.MODELLING. Modern finance has put much effort into developing new models for credit risk. ... Italso follows thatthe probability of default between 5 years and 10 years is Source: British Bankers Association, JP Morgan Research. 2CREDIT anbsp;...


Title:Levy Processes in Credit Risk
Author: Wim Schoutens, Jessica Cariboni
Publisher:John Wiley & Sons - 2010-06-15
ISBN-13:

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