Credit derivatives - Geoff Chaplin

The credit derivatives industry has come under close scrutiny overthe past few years, with the recent financial crisis highlightingthe instability of a number of credit structures and throwing theindustry into turmoil. What has been made clear by recent events isthe necessity for a thorough understanding of credit derivatives byall parties involved in a transaction, especially traders,structurers, quants and investors.

Fully revised and updated to take in to account the newproducts, markets and risk requirements post financial crisis,Credit Derivatives: Trading, Investing and Risk Management,Second Edition, covers the subject from a real worldperspective, tackling issues such as liquidity, poor data, andcredit spreads, to the latest innovations in portfolio products,hedging and risk management techniques.

The book concentrates on practical issues and develops anunderstanding of the products through applications and detailedanalysis of the risks and alternative means of trading.

It provides:

• a description of the key products, applications, and ananalysis of typical trades including basis trading, hedging, andcredit structuring;
• analysis of the industry standard 'default and recovery' andCopula models including many examples, and a description of themodels' shortcomings;
• tools and techniques for the management of a portfolio or bookof credit risks including appropriate and inappropriate methods ofcorrelation risk management;
• a thorough analysis of counterparty risk;
• an intuitive understanding of credit correlation in reality andin the Copula model.

The book is thoroughly updated to reflect the changes theindustry has seen over the past 5 years, notably with an analysisof the lead up and causes of the credit crisis. It contains 50% newmaterial, which includes copula valuation and hedging, portfoliooptimisation, portfolio products and correlation risk management,pricing in illiquid environments, chapters on the evolution ofcredit management systems, the credit meltdown and new chapters onthe implementation and testing of credit derivative models andsystems.

The book is accompanied by a website which contains toolsfor credit derivatives valuation and risk management, illustratingthe models used in the book and also providing a valuationtoolkit.