Comprehensive Guide to Credit Products – Pricing, Hedging, and Risk Management

Author: [Angola] Avanque, [Angola] Gregori
Publisher:
Publish Date: 2004-12-01
Features: The book revolves around the core issue of credit risk management in financial engineering. By analyzing credit risk in capital markets and constructing a credit risk management framework, it systematically introduces the credit risk components of various financial derivatives, credit risk management, and pricing methods for credit risk. The book is divided into 8 chapters:
Chapter 1 reviews the relevant concepts of credit risk management;
Chapter 2 introduces the concept of stochastic exposure of fixed-income instruments and analyzes the characteristics of several typical exposures as well as the two factors influencing exposure;
Chapter 3 builds on Chapter 2 by introducing the default process into the exposure distribution, explaining methods for calculating credit portfolio risk, and using one-period and multi-period models to illustrate the impact of relevant factors on the calculation of credit portfolio risk;
Chapter 4 supplements Chapter 3 by introducing some basic aspects of credit risk management;
Chapter 5 covers the basics of credit derivatives and their pricing;
Chapter 6 discusses the pricing and hedging of credit derivatives products, using standard credit default swaps as the primary tool for hedging counterparty default and credit spread risk. It also introduces variable exposure and random default frequency, while considering contract pricing under both single investment and portfolio scenarios;
Chapter 7 incorporates credit elements into the pricing of convertible bonds, analyzing the credit risk of convertible bonds and its impact on their pricing;
The final chapter discusses three credit-related topics: the impact of market illiquidity, the rebalancing of hedging investments due to non-continuity, and information asymmetry among market participants.
Additionally, in the appendix, 6 important related papers from the Journal of Risk or risk books are excerpted as supplementary material to the book.