Structured Credit Portfolio Analysis, Baskets and CDOs

Structured Credit Portfolio Analysis, Baskets and CDOs

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The financial industry is swamped by credit products whose economic performance is linked to the performance of some underlying portfolio of credit-risky instruments, like loans, bonds, swaps, or asset-backed securities. Financial institutions continuously use these products for tailor-made long and short positions in credit risks. Based on a steadily growing market, there is a high demand for concepts and techniques applicable to the evaluation of structured credit products. Written from the perspective of practitioners who apply mathematical concepts to structured credit products, Structured Credit Portfolio Analysis, Baskets & CDOs starts with a brief wrap-up on basic concepts of credit risk modeling and then quickly moves on to more advanced topics such as the modeling and evaluation of basket products, credit-linked notes referenced to credit portfolios, collateralized debt obligations, and index tranches. The text is written in a self-contained style so readers with a basic understanding of probability will have no difficulties following it. In addition, many examples and calculations have been included to keep the discussion close to business applications. Practitioners as well as academics will find ideas and tools in the book that they can use for their daily more

Product details

  • Hardback | 376 pages
  • 152 x 226 x 20mm | 359.99g
  • Taylor & Francis Inc
  • Chapman & Hall/CRC
  • Boca Raton, FL, United States
  • English
  • 104 black & white illustrations, 28 black & white tables
  • 1584886471
  • 9781584886471
  • 1,885,343

Table of contents

From Single Credit Risks to Credit Portfolios Modeling Single-Name Credit Risk Ratings and Default Probabilities Credit Exposure Loss Given Default Modeling Portfolio Credit Risk Systematic and Idiosyncratic Credit Risk Loss Distribution of Credit Portfolios Practicability Versus Accuracy Default Baskets Introductory Example: Duo Baskets First- and Second-to-Default Modeling Derivation of PD Term Structures A Time-Homogeneous Markov Chain Approach A Non-Homogeneous Markov Chain Approach Extrapolation Problems for PD Term Structures Duo Basket Evaluation for Multi-Year Horizons Dependent Default Times Default Times and PD Term Structures Survival Function and Hazard Rate Calculation of Default Time Densities and Hazard Rate Functions From Latent Variables to Default Times Dependence Modeling via Copula Functions Copulas in Practice Visualization of Copula Differences and Mathematical Description by Dependence Measures Impact of Copula Differences to the Duo Basket A Word of Caution Nth-to-Default Modeling Nth-to-Default Basket with the Gaussian Copula Nth-to-Default Basket with the Student-t Copula Nth-to-Default Basket with the Clayton Copula Nth-to-Default Simulation Study Evaluation of Cash Flows in Default Baskets Scenario Analysis Example of a Basket Credit-Linked Note (CLN) Collateralized Debt and Synthetic Obligations A General Perspective on CDO Modeling A Primer on CDOs Risk Transfer Spread and Rating Arbitrage Funding Benefits Regulatory Capital Relief CDO Modeling Principles CDO Modeling Approaches Introduction of a Sample CSO A First-Order Look at CSO Performance Monte Carlo Simulation of the CSO Implementing an Excess Cash Trap Multi-Step and First Passage Time Models Analytic, Semi-Analytic, and Comonotonic CDO Evaluation Approaches Single-Tranche CDOs (STCDOs) Basics of Single-Tranche CDOs CDS Indices as Reference Pool for STCDOs ITraxx Europe Untranched ITraxx Europe Index Tranches: Pricing, Delta Hedging, and Implied Correlations Tranche Risk Measures Expected Shortfall Contributions Tranche Hit Contributions of Single Names Applications: Asset Selection, Cost-to-Securitize Remarks on Portfolios of CDOs Some Practical Remarks Suggestions for Further Reading Appendix The Gamma Distribution The Chi-Square Distribution The Student-t Distribution A Natural Clayton-Like Copula Example Entropy-Based Rationale for Gaussian and Exponential Distributions as Natural Standard Choices Tail Orientation in Typical Latent Variable Credit Risk Models The Vasicek Limit Distribution One-Factor Versus Multi-Factor Models Description of the Sample Portfolio CDS Names in CDX.NA.IG and iTraxx Europeshow more