Credit Correlation [electronic resource] : Theory and Practice /
Elouerkhaoui, Youssef.author.
This book provides an advanced guide to correlation modelling for credit portfolios, providing both theoretical underpinnings and practical implementation guidance. The book picks up where pre-crisis credit books left off, offering guidance for quants on the latest tools and techniques for credit portfolio modelling in the presence of CVA (Credit Value Adjustments). Written at an advanced level, it assumes that readers are familiar with the fundamentals of credit modelling covered, for example, in the market leading books by Schonbucher (2003) and O’Kane (2008). Coverage will include the latest default correlation approaches; correlation modelling in the ‘Marshall-Olkin’ contagion framework, in the context of CVA; numerical implementation; and pricing, calibration and risk challenges. The explosive growth of credit derivatives markets in the early-to-mid 000’s was bought to a close by the 2007 financial crisis, where these instruments were held largely to blame for the economic downturn. However, in the wake of increased regulation across all financial instruments and the challenge of buying and selling bonds in large amounts, credit derivatives have once again been found to be the answer and the market has grown significantly.Written by a practitioner for practitioners, this book will also interest researchers in mathematical finance who want to understand how things happen and work ‘on the floor’. Building the reader’s knowledge from the ground up, and with numerous real life examples used throughout, this book will  prove a popular reference for anyone with a mathematical mind interested credit markets.  .
Includes bibliographical references.
Chapter 1 Credit Modelling Fundamentals - Filtrations, Point Processes and Intensities -- Chapter2 Expectations in the Enlarged Filtration - The Generalized Dellacherie Formula -- Chapter3 The Basics of Default Correlation Modelling -- Chapter4 Default Correlation Calibration - Link between Copulas and Conditional Jump Diffusions -- Chapter5 Correlation Demystified: A General Overview -- Chapter6 An Introduction to the Marshall-Olkin Copula -- Chapter7 Numerical Tools: Basket Asymptotic Expansions -- Chapter8 CDO-Squared: Correlation of Correlation -- Chapter9 Second Generation Models: From Flat Correlation to Correlation Skew -- Chapter10 Third Generation Models: From Static to Dynamic Models -- Chapter11 Pricing in a Dynamic Credit Model -- Chapter12 Practical Applications of Dynamic Models: Pricing Path-Dependent Credit Exotics -- Chapter13 Base Correlation Calibration with a Stochastic Recovery Model -- Chapter14 Hedging in Incomplete Credit Markets: JTD vs CR01 -- Chapter15 New Frontiers in Credit Modelling: the CVA Challenge.
This book provides an advanced guide to correlation modelling for credit portfolios, providing both theoretical underpinnings and practical implementation guidance. The book picks up where pre-crisis credit books left off, offering guidance for quants on the latest tools and techniques for credit portfolio modelling in the presence of CVA (Credit Value Adjustments). Written at an advanced level, it assumes that readers are familiar with the fundamentals of credit modelling covered, for example, in the market leading books by Schonbucher (2003) and O’Kane (2008). Coverage will include the latest default correlation approaches; correlation modelling in the ‘Marshall-Olkin’ contagion framework, in the context of CVA; numerical implementation; and pricing, calibration and risk challenges. The explosive growth of credit derivatives markets in the early-to-mid 000’s was bought to a close by the 2007 financial crisis, where these instruments were held largely to blame for the economic downturn. However, in the wake of increased regulation across all financial instruments and the challenge of buying and selling bonds in large amounts, credit derivatives have once again been found to be the answer and the market has grown significantly.Written by a practitioner for practitioners, this book will also interest researchers in mathematical finance who want to understand how things happen and work ‘on the floor’. Building the reader’s knowledge from the ground up, and with numerous real life examples used throughout, this book will  prove a popular reference for anyone with a mathematical mind interested credit markets.  .
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