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Introduction to credit risk modeling /

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"Preface Second Edition The first edition of this book appeared eight years ago. Since then the banking industry experienced a lot of change and challenges. The most recent financial crisis which started around May 2007 and lasted in its core period until early 2009 gave rise for a lot of scept...

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Bibliographic Details
Main Authors: Bluhm, Christian (Author), Overbeck, Ludger (Author), Wagner, Christoph, 1966- (Author)
Corporate Author: Taylor & Francis
Format: eBook
Language:English
Published: Boca Raton, FL : CRC Press, [2010]
Edition:Second edition.
Series:Chapman & Hall/CRC financial mathematics series.
Subjects:
Credit > Management > Mathematical models.
Risk management > Mathematical models.
Crédit > Gestion > Modèles mathématiques.
Gestion du risque > Modèles mathématiques.
BUSINESS & ECONOMICS > Industrial Management.
BUSINESS & ECONOMICS > Management.
BUSINESS & ECONOMICS > Management Science.
BUSINESS & ECONOMICS > Organizational Behavior.
Credit > Management > Mathematical models
Risk management > Mathematical models
Electronic books.
Online Access:Connect to the full text of this electronic book
Table of Contents:
  • 1. The Basics of Credit Risk Management
  • 1.1. Expected Loss
  • 1.1.1. Probability of Default (PD)
  • 1.1.2. The Exposure at Default
  • 1.1.3. The Loss Given Default
  • 1.1.4. A Remark on the Relation between PD, EAD, LGD
  • 1.2. Unexpected Loss
  • 1.2.1. Economic Capital
  • 1.2.2. The Losws Distribution
  • 1.2.3. Modeling Correlations by Means of Factor Modles
  • 1.3. Regulatory Capital and the Basel Initiative
  • 2. Modeling Correlated Defaults
  • 2.1. The Bernoulli Model
  • 2.1.1. A General Bernoulli Mixture Model
  • 2.1.2. Uniform Default Probability and Uniform Correlation
  • 2.2. The Poisson Model
  • 2.2.1. A General Poisson Mixture Model
  • 2.2.2. Uniform Default Intensity and Uniform Correlation
  • 2.3. Bernoulli versus Poisson Mixture
  • 2.4. An Overview of Common Model Concepts
  • 2.4.1. Moody's KMV's and RiskMetrics' Model Approach
  • 2.4.2. MOdel Approach of CreditRisk+
  • 2.4.3. Credit Portfolio View
  • 2.4.4. Basic Remarks on Dynamic Intensity Models
  • 2.5. One Factor/Sector Models
  • 2.5.1. One-Factor Models in the Asset Value Model Setup
  • 2.5.2. The CreditRisk+ One-Sector Model
  • 2.5.3. Comparison of One-Factor and One-Sector Models
  • 2.6. Loss Dependence by Means of Copula Functions
  • 2.6.1. Copulas: Variations of a Scheme
  • 2.7. Working Example on Asset Correlations
  • 2.8. Generating the Portfolio Loss Distribution
  • 2.8.1. Some Prerequisites from Probability Theory
  • 2.8.2. Conditional Independence
  • 2.8.3. Technique I: Recursive Generation
  • 2.8.4. Technique II: Fourier Transformation
  • 2.8.5. Technique III: Saddle-Point Approximation
  • 2.8.6. Technique IV: Importance Sampling
  • 3. Asset Value Models
  • 3.1. Introduction and a Brief Guide to the Literature
  • 3.2. A Few Words about Calls and puts
  • 3.2.1. Geometric Brownian Motion
  • 3.2.2. Put and Call Options
  • 3.3. Merton's Asset Value Model
  • 3.3.1. Capital Structure: Option- Theoretic Approach
  • 3.3.2. Asset from Equity Values
  • 3.4. Transforming Equity into Asset Values: A Working Approach
  • 3.4.1. Ito's Formula "Light"
  • 3.4.2. Black-Scholes Partial Differential Equation
  • 4. The Credit Rik+ Model
  • 4.1. The Modeling Framewiork of CreditRisk+
  • 4.2. Construction Step 1: Independent Obligors
  • 4.3. Construction Step 2: Sector Model
  • 4.3.1. Sector Default Distribution
  • 4.3.2. Sector Compound Distribution
  • 4.3.3. Sector Convolution
  • 4.3.4. Calculating the Loss Distribution
  • 5. Risk Measures and Capital Allocation
  • 5.1. Coherent Risk Measures and Expected Shortfall
  • 5.1.1. Expected Shortfall
  • 5.1.2. Spectral Risk Measures
  • 5.1.3. Density of a Risk Measure
  • 5.2. Contributorty Capital
  • 5.2.1. Axiomatic Approach to Capital Allocation
  • 5.2.2. Capital Allocation in Practice
  • 5.2.3. Variance/Covariance Approach
  • 5.2.4. Capital Allocation w.r.t. Value-at-Risk
  • 5.2.5. Capital Allocations w.r.t. Expected Shortfall
  • 5.2.6. A Simulation Study
  • 6. Term Structure of Default Probability
  • 6.1. Survival Function and Hazard Rate
  • 6.2. Risk-Neutral vs. Actual Default Probabilities
  • 6.3. Term Structure Based on Historical Default Information
  • 6.3.1. Exponential Term Structure
  • 6.3.2. Direct Calibration of Multi-Year Default Probabilities
  • 6.3.3. Migration Technique and Q-Matrices
  • 6.3.4. A Non-Homogeneous Markov Chain Approach
  • 6.4. Term Structure Based on Market Spreads
  • 7. Credit Derivatives
  • 7.1. Total Return Swaps
  • 7.2. Credit Default Products
  • 7.3. Basket Credit Derivatives
  • 7.4. Credit Spread Products
  • 7.5. Credit-Linked Notes
  • 8. Collateralized Debt Obligations
  • 8.1. Introduction to Collateralized Debt Obligations
  • 8.1.1. Typical Cash Flow CDO Structure
  • 8.1.2. Typical Synthetic CLO Structure
  • 8.2. Different Roles of Banks in the CDO Market
  • 8.2.1. The Originator's Point of View
  • 8.2.2. The Investor's Point of View
  • 8.3. CDOs from the Modeling Point of View
  • 8.4. Multi-Period Credit Models
  • 8.4.1. Migration Model
  • 8.4.2. Correlated Default Time Models
  • 8.4.3. First-Passage-Time Models
  • 8.4.4. Stochastic Default Intensity Models
  • 8.4.5. Intertemporal Dependence and Autocorrelation
  • 8.5. Former Rating Agency Model: Moody's BET
  • 8.6. Developments, Model Issues and Further Reading.