A unique volume that brings together the most innovative and instrumental papers on credit risk modelling to reflect the major developments to date. This volume also focuses on the influences that are currently shaping the industry.
Designed in order for readers to easily familiarise themselves with all the leading authorities, ideas and techniques used in today’s business.

The papers are subdivided into easy-reference sections that include credit portfolio modelling and measurement, credit derivatives, default models and prediction, and credit risk modelling in relation to Basel II. Introduced by Michael Gordy, who illustrates the significance that each chapter has on modern credit practice. Allows the reader to compare and contrast two different philosophies in credit risk modelling - "structural models" and "reduced-form models". Covers the statistical and financial tools that lie behind credit risk theory and management in addition to offering a comprehensive treatment of the pricing of credit derivatives, including credit swaps and CDOs. Includes detailed analysis on the basic parameters that dominate credit risk modelling, such as default probabilities, credit ratings, rating transitions and recovery rates.


TABLE OF CONTENTS

I. PRICING CREDIT RISK
1. Credit Derivatives Made Simple
2. Applying HJM to Credit Risk
3. The Price of Credit
4. Price and Probability
5. Distance to Default
6. Equity to Credit Pricing
7. Getting the Pricing Right
8. On the Edge of Completeness

II. MEASURING DEFAULT RISK
9. Measuring Default Accurately
10. A Credit Risk Catwalk
11. The Need for Hybrid Models

III. DEPENDENCE IN DEFAULTS AND RECOVERIES
12. Devil in the Parameters
13. Modelling Default Correlation
14. How Dependent are Defaults?
15. Copulas and Credit Models
16. Depressing Recoveries

IV. VALUE-AT-RISK FOR CREDIT PORTFOLIOS
17. Integrating Correlations
18. Taking to the Saddle
19. Calculating Portfolio Loss

V. BASEL II
20. IRB Approach Explained
21. Pro-cyclicality in the New Basel Accord
22. The Maturity Effect on Credit Risk Capital

VI. ASYMPTOTIC METHODS IN VAR
23. Loan Portfolio Value
24. Probing Granularity
25. Analytical Approach to Credit Risk Modelling
26. Unsystematic Credit Risk

VII. PRICING MULTI-NAME DEFAULT RISK
27. Copula Vulnerability
28. Pricing Default Baskets
29. Long or Short in CDOs
30. Extreme Events and Default Baskets

VIII. VALUE-AT-RISK FOR ASSET SECURITISATIONS
31. Credit Risk in Asset Securitisations: An Analytical Model
32. Coarse-grained CDOs
33. Random Tranches