Credit risk: Modelling, valuation and hedging
The main purpose of the outstanding monograph is to present a comprehensive survey of the existing developments in the area of credit risk research, as well as to put forth the most recent advancements in this field. An important feature of this book is its attempt to bridge the gap between the mathematical theory of credit risk and the financial practice. The book is organized in three main parts, with 15 chapters. Part I (Structural Approach) contains Chapters 1-3, devoted to the classic value-of-the firm approach to the valuation and hedging of corporate debt. This approach is also frequently called as the structural approach. Chapter 1 provides an introduction to the basic concepts that underlie the area of credit risk valuation and management. The terminology and notation related to defaultable claims is introduced an overview of the market instruments associated with credit risk is given, and a description of the three types of credit-risk sensitive devices is provided: corporate bond, vulnerable claims, and credit derivatives. Chapters 2 and 3 comprise the so-called structural approach, referred also as the option-theoretic approach, based on the first-passage-time models. Part II (Hazard Processes) includes Chapters 4-7, and provides a systematic exposition of the technical tools needed in the reduced-form approach to credit risk modeling. Much attention is paid to characterization of random times in terms of hazard functions, hazard processes, martingale hazard processes, and to evaluating relevant (conditional) probabilities and (conditional) expectations in terms of these functions and processes. Pertinent versions of Girsanov's theorem and martingale representation theorem are enclosed, and a comprehensive study of the problems related to the modeling of several random times within the framework of intensity-based approach is presented. Part III (Reduced-Form Modeling), with Chapters 8-15, is dedicated to illustrate the developed theory trough examples of real life credit derivatives and market methods related to risk management. Chapter 8 discusses fundamentals issues regarding the intensity-based valuation and hedging of defaultable claims in case of single reference credit. The key concept is the survival probability of a reference instrument or entity, more specifically, the hazard rate that represents the intensity of default. Chapters 9 and 10 deal with the case of several reference credit entities, analyzing basket derivatives and default correlations. Chapter 11 presents the relevant aspects and the role of Markov chain theory in the modeling of credit migrations, while Chapter 12 examines credit risk models with multiple ratings, using also a methodology based on Markov models. In Chapter 13, the authors expose the most recent developments that combine the HJM (Heath-Jarrow-Morton) methodology for modeling of instantaneous forward rates with a conditionally Markov model of credit migrations. Probabilistic interpretation of the market price of interest rate risk and the market price of the credit risk is highlighted. Chapters 14 and 15 introduce various typical examples of defaultable forward constructs and the associated types of defaultable market rates. BGM (Brace-Gatarek-Musiela) model of forward LIBOR rates, Jamshidian's model of forward swap rates, and ideas related to the modeling of defaultable LIBOR and swap rates are also included. The contents of this book provides an indispensable guide to graduate students, researchers, and also to advanced practitioners in the fields with an explosive development now-a-days, such as finance theory, mathematical finance, and financial engineering.
- Distressed debt prices and recovery rate estimation
- Defaultable game options in a hazard process model
- Multi-factor affine term structure model with single regime shift: Real term structure under zero interest rate
- Pricing derivative credit risk
- Credit risk. Measurement, evaluation and management
- General dynamic term structures under default risk
- Quantifying risks with exact analytical solutions of derivative pricing distribution
- Nonlinear valuation under credit, funding, and margins: existence, uniqueness, invariance, and disentanglement
- Dependent defaults and losses with factor copula models
- Dynamics of multivariate default system in random environment
- Complete discounted cash flow valuation
- Quantile hedging pension payoffs: an analysis of investment incentives
- Credit risk in an economy with new firms arrivals
- Semi-analytical formula for pricing bilateral counterparty risk of CDS with correlated credit risks
- Number of paths versus number of basis functions in American option pricing
- Modeling credit risk with partial information.
- On the term structure of lending interest rates when a fraction of collateral is recovered upon default
- On the simulation of portfolios of interest rate and credit risk sensitive securities
- Shot-noise driven multivariate default models
- A multiple-curve HJM model of interbank risk
- Asymptotic behaviour of the survival probabilities in an inhomogeneous semi-Markov model for the migration process in credit risk
- Optimal portfolio and consumption selection with default risk
- Causality between stopped filtrations and some applications
- Credit risk and asymmetric information: a simplified approach
- Perturbative expansion technique for non-linear FBSDEs with interacting particle method
- Asymptotic analysis for one-name credit derivatives
- Analytical valuation of vulnerable European and Asian options in intensity-based models
- Counterparty risk valuation on credit-linked notes under a Markov chain framework
- On the finite horizon optimal switching problem with random lag
- CDS pricing with fractional Hawkes processes
- A stochastic Stackelberg differential reinsurance and investment game with delay in a defaultable market
- Time-consistent investment-reinsurance strategy with a defaultable security under ambiguous environment
- Risk-sensitive credit portfolio optimization under partial information and contagion risk
- Approximate value adjustments for European claims
- Conditional multivariate distributions of phase-type for a finite mixture of Markov jump processes given observations of sample path
- A lending scheme for a system of interconnected banks with probabilistic constraints of failure
- American perpetual options with random start
- Mean-variance asset-liability management in a non-Markovian regime-switching jump-diffusion market with random horizon
- CVA and vulnerable options pricing by correlation expansions
- Optimal investment and risk control problems with delay for an insurer in defaultable market
- Pricing vulnerable claims in a Lévy-driven model
- A family of density expansions for Lévy-type processes
- Background filtrations and canonical loss processes for top-down models of portfolio credit risk
- Robust equilibrium excess-of-loss reinsurance and CDS investment strategies for a mean-variance insurer with ambiguity aversion
- Linear credit risk models
- Credit, funding, margin, and capital valuation adjustments for bilateral portfolios
- Information uncertainty related to marked random times and optimal investment
- Credit risk and solvency capital requirements
- Reduced-form framework under model uncertainty
- Optimal reinsurance and investment problem for an insurer with counterparty risk
- No arbitrage in a simple credit risk model
- A unified approach to pricing and risk management of equity and credit risk
- On the single name CDS price under structural modeling
- The dependence of assets and default threshold with thinning-dependence structure
- On the asymptotic behavior of the prices of Asian options
- Dynamical analysis of corporate bonds based on the yield spread term-quality surface
- Polynomial diffusion models for life insurance liabilities
- Pricing and trading credit default swaps in a hazard process model
- Ergodic and adaptive control of hidden Markov models
- Pricing European options on deferred annuities
- Modeling credit value adjustment with downgrade-triggered termination clause using a ruin theoretic approach
- Fuzzy semi-Markov migration process in credit risk
- Consistent dynamic affine mortality models for longevity risk applications
- Local risk-minimization under the benchmark approach
- Numerical methods to quantify the model risk of basket default swaps
- A model of credit risk based on cash flow
- Information reduction via level crossings in a credit risk models
- Insider trading in an equilibrium model with default: a passage from reduced-form to structural modelling
- Loss reserves in the light of stochastic processes
- Credit derivatives in an affine framework
- Credit risk optimization using factor models
- Quadratic hedging methods for defaultable claims
- A reflection principle for correlated defaults
- Estimating doubly stochastic Poisson process with affine intensities by Kalman filter
- Default probabilities of a holding company, with complete and partial information
- Closed-form formulas for the distribution of the jumps of doubly-stochastic Poisson processes
- Markov chain approximation and measure change for time-inhomogeneous stochastic processes
- Classical solutions of the backward PIDE for Markov modulated marked point processes and applications to CAT bonds
- Time-consistent evaluation of credit risk with contagion
- Berry-Esseen inequalities for the fractional Black-Karasinski model of term structure of interest rates
- A semiparametric factor model for CDO surfaces dynamics
- CVA in fractional and rough volatility models
- Large deviations for Markov-modulated diffusion processes with rapid switching
- A Markov copula model with regime switching and its application
- Credit risk modelling: intensity based approach
- scientific article; zbMATH DE number 1724298 (Why is no real title available?)
- Credit risk and incomplete information: filtering and EM parameter estimation
- A multidimensional exponential utility indifference pricing model with applications to counterparty risk
- Pricing and valuation under the real-world measure
- A Markov Chain Copula Model for Credit Default Swaps with Bilateral Counterparty Risk
- An improved approach to evaluate default probabilities and default correlations with consistency
- A structural jump threshold framework for credit risk
- Credit risk
- Expectations of functions of stochastic time with application to credit risk modeling
- On valuation with stochastic proportional hazard models in finance
- Rating based Lévy Libor model
- Pricing defaultable bonds in a Markov modulated market
- A remark on credit risk models and copula
- Credit risk valuation with rating transitions and partial information
- The Formation of Financial Bubbles in Defaultable Markets
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