{"product_id":"levy-processes-in-credit-risk-isbn-9780470743065","title":"Levy Processes in Credit Risk","description":"This book is an introductory guide to using Lévy processes for credit risk modelling. It covers all types of credit derivatives: from the single name vanillas such as Credit Default Swaps (CDSs) right through to structured credit risk products such as Collateralized Debt Obligations (CDOs), Constant Proportion Portfolio Insurances (CPPIs) and Constant Proportion Debt Obligations (CPDOs) as well as new advanced rating models for Asset Backed Securities (ABSs).  \u003cp\u003eJumps and extreme events are crucial stylized features, essential in the modelling of the very volatile credit markets - the recent turmoil in the credit markets has once again illustrated the need for more refined models.\u003c\/p\u003e \u003cp\u003eReaders will learn how the classical models (driven by Brownian motions and Black-Scholes settings) can be significantly improved by using the more flexible class of Lévy processes. By doing this, extreme event and jumps can be introduced into the models to give more reliable pricing and a better assessment of the risks.\u003c\/p\u003e \u003cp\u003eThe book brings in high-tech financial engineering models for the detailed modelling of credit risk instruments, setting up the theoretical framework behind the application of Lévy Processes to Credit Risk Modelling before moving on to the practical implementation. Complex credit derivatives structures such as CDOs, ABSs, CPPIs, CPDOs are analysed and illustrated with market data.\u003c\/p\u003e  \u003cb\u003ePreface.\u003c\/b\u003e  \u003cp\u003e\u003cb\u003eAcknowledgements.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003ePART I: INTRODUCTION.\u003c\/p\u003e \u003cp\u003e1 An Introduction to Credit Risk.\u003c\/p\u003e \u003cp\u003e1.1 Credit Risk.\u003c\/p\u003e \u003cp\u003e1.1.1 Historical and Risk-Neutral Probabilities.\u003c\/p\u003e \u003cp\u003e1.1.2 Bond Prices and Default Probability.\u003c\/p\u003e \u003cp\u003e1.2 Credit Risk Modelling.\u003c\/p\u003e \u003cp\u003e1.3 Credit Derivatives.\u003c\/p\u003e \u003cp\u003e1.4 Modelling Assumptions.\u003c\/p\u003e \u003cp\u003e1.4.1 Probability Space and Filtrations.\u003c\/p\u003e \u003cp\u003e1.4.2 The Risk-Free Asset.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 An Introduction to Lévy Processes.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 Brownian Motion.\u003c\/p\u003e \u003cp\u003e2.2 Lévy Processes.\u003c\/p\u003e \u003cp\u003e2.3 Examples of Lévy Processes.\u003c\/p\u003e \u003cp\u003e2.3.1 Poisson Process.\u003c\/p\u003e \u003cp\u003e2.3.2 Compound Poisson Process.\u003c\/p\u003e \u003cp\u003e2.3.3 The Gamma Process.\u003c\/p\u003e \u003cp\u003e2.3.4 Inverse Gaussian Process.\u003c\/p\u003e \u003cp\u003e2.3.5 The CMY Process.\u003c\/p\u003e \u003cp\u003e2.3.6 The Variance Gamma Process.\u003c\/p\u003e \u003cp\u003e2.4 Ornstein–Uhlenbeck Processes.\u003c\/p\u003e \u003cp\u003e2.4.1 The Gamma-OU Process.\u003c\/p\u003e \u003cp\u003e2.4.2 The Inverse Gaussian-OU Process.\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePART II: SINGLE-NAME MODELLING.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3 Single-Name Credit Derivatives.\u003c\/p\u003e \u003cp\u003e3.1 Credit Default Swaps.\u003c\/p\u003e \u003cp\u003e3.1.1 Credit Default Swaps Pricing.\u003c\/p\u003e \u003cp\u003e3.1.2 Calibration Assumptions.\u003c\/p\u003e \u003cp\u003e3.2 Credit Default Swap Forwards.\u003c\/p\u003e \u003cp\u003e3.2.1 Credit Default Swap Forward Pricing.\u003c\/p\u003e \u003cp\u003e3.3 Constant Maturity Credit Default Swaps.\u003c\/p\u003e \u003cp\u003e3.3.1 Constant Maturity Credit Default Swaps Pricing.\u003c\/p\u003e \u003cp\u003e3.4 Options on CDS.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 Firm-Value Lévy Models.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 The Merton Model.\u003c\/p\u003e \u003cp\u003e4.2 The Black–Cox Model with Constant Barrier.\u003c\/p\u003e \u003cp\u003e4.3 The Lévy First-Passage Model.\u003c\/p\u003e \u003cp\u003e4.4 The Variance Gamma Model.\u003c\/p\u003e \u003cp\u003e4.4.1 Sensitivity to the Parameters.\u003c\/p\u003e \u003cp\u003e4.4.2 Calibration on CDS Term Structure Curve.\u003c\/p\u003e \u003cp\u003e4.5 One-Sided Lévy Default Model.\u003c\/p\u003e \u003cp\u003e4.5.1 Wiener–Hopf Factorization and Default Probabilities.\u003c\/p\u003e \u003cp\u003e4.5.2 Illustration of the Pricing of Credit Default Swaps.\u003c\/p\u003e \u003cp\u003e4.6 Dynamic Spread Generator.\u003c\/p\u003e \u003cp\u003e4.6.1 Generating Spread Paths.\u003c\/p\u003e \u003cp\u003e4.6.2 Pricing of Options on CDSs.\u003c\/p\u003e \u003cp\u003e4.6.3 Black’s Formulas and Implied Volatility.\u003c\/p\u003e \u003cp\u003eAppendix: Solution of the PDIE.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 IntensityLévy Models.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 Intensity Models for Credit Risk.\u003c\/p\u003e \u003cp\u003e5.1.1 Jarrow–Turnbull Model.\u003c\/p\u003e \u003cp\u003e5.1.2 Cox Models.\u003c\/p\u003e \u003cp\u003e5.2 The Intensity-OU Model.\u003c\/p\u003e \u003cp\u003e5.3 Calibration of the Model on CDS Term Structures.\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePART III: MULTIVARIATE MODELLING.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6 Multivariate Credit Products.\u003c\/p\u003e \u003cp\u003e6.1 CDOs.\u003c\/p\u003e \u003cp\u003e6.2 Credit Indices.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Collateralized Debt Obligations.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 Introduction.\u003c\/p\u003e \u003cp\u003e7.2 The Gaussian One-Factor Model.\u003c\/p\u003e \u003cp\u003e7.3 Generic One-Factor Lévy Model.\u003c\/p\u003e \u003cp\u003e7.4 Examples of Lévy Models.\u003c\/p\u003e \u003cp\u003e7.5 Lévy Base Correlation.\u003c\/p\u003e \u003cp\u003e7.5.1 The Concept of Base Correlation.\u003c\/p\u003e \u003cp\u003e7.5.2 Pricing Non-Standard Tranches.\u003c\/p\u003e \u003cp\u003e7.5.3 Correlation Mapping for Bespoke CDOs.\u003c\/p\u003e \u003cp\u003e7.6 Delta-Hedging CDO tranches.\u003c\/p\u003e \u003cp\u003e7.6.1 Hedging with the CDS Index.\u003c\/p\u003e \u003cp\u003e7.6.2 Delta-Hedging with a Single-Name CDS.\u003c\/p\u003e \u003cp\u003e7.6.3 Mezz-Equity hedging.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Multivariate Index Modelling.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 Black’s Model.\u003c\/p\u003e \u003cp\u003e8.2 VG Credit Spread Model.\u003c\/p\u003e \u003cp\u003e8.3 Pricing Swaptions using FFT.\u003c\/p\u003e \u003cp\u003e8.4 Multivariate VG Model.\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePART IV: EXOTIC STRUCTURED CREDIT RISK PRODUCTS.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9 Credit CPPIs and CPDOs.\u003c\/p\u003e \u003cp\u003e9.1 Introduction.\u003c\/p\u003e \u003cp\u003e9.2 CPPIs.\u003c\/p\u003e \u003cp\u003e9.3 Gap Risk.\u003c\/p\u003e \u003cp\u003e9.4 CPDOs.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 Asset-Backed Securities.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Introduction.\u003c\/p\u003e \u003cp\u003e10.2 Default Models.\u003c\/p\u003e \u003cp\u003e10.2.1 Generalized Logistic Default Model.\u003c\/p\u003e \u003cp\u003e10.2.2 Lévy Portfolio Default Model.\u003c\/p\u003e \u003cp\u003e10.2.3 Normal One-Factor Default Model.\u003c\/p\u003e \u003cp\u003e10.2.4 Generic One-Factor Lévy Default Model.\u003c\/p\u003e \u003cp\u003e10.3 Prepayment Models.\u003c\/p\u003e \u003cp\u003e10.3.1 Constant Prepayment Model.\u003c\/p\u003e \u003cp\u003e10.3.2 Lévy Portfolio Prepayment Model.\u003c\/p\u003e \u003cp\u003e10.3.3 Normal One-Factor Prepayment Model.\u003c\/p\u003e \u003cp\u003e10.4 Numerical Results.\u003c\/p\u003e \u003cp\u003e\u003cb\u003eBibliography.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eIndex.\u003c\/b\u003e\u003c\/p\u003e  \"This text introduces into the use of Levy processes in credit risk modeling. After a general overview of credit risk and standard credit derivatives, the authors provide a short introduction into Levy processes in general. This material is then used to study single-name credit derivatives. Following this, the authors introduce into firm-value Levy models, including the Merton model, Black-Cox model, Levy first passage model, variance gamma model and the one sided Levy default model. The problem of calibration is discussed. After that, the authors introduce intensity Levy models such as the Jarrow and Turnbull model, the Cox model and the intensity-OU model. Multivariate credit products, collateralized debt obligations and multivariate index modeling are discussed in the following. In the final part of their book, the authors study credit CPPIs and CPDOs as well as asset-backed securities.\" (\u003ci\u003eZentralblatt MATH\u003c\/i\u003e, 2010)\u003cbr\u003e \u003cbr\u003e  \u003cb\u003eWim Schoutens\u003c\/b\u003e (Leuven, Belgium) is a research professor in financial engineering in the Department of Mathematics at the Catholic University of Leuven, Belgium. He has extensive practical experience of model implementation and is well known for his consulting work in the banking industry. Wim is the author of \u003ci\u003eLévy Processes in Finance\u003c\/i\u003e and co-editor of \u003ci\u003eExotic Option Pricing and Advanced Lévy Models\u003c\/i\u003e both published by Wiley. He teaches at 7city Learning and London Financial Studies. He is Managing Editor of the \u003ci\u003eInternational Journal of Theoretical and Applied Finance\u003c\/i\u003e and Associate Editor of \u003ci\u003eMathematical Finance\u003c\/i\u003e and \u003ci\u003eReview of Derivatives Research\u003c\/i\u003e.  \u003cp\u003e\u003cb\u003eJessica Cariboni\u003c\/b\u003e (Ispra, Italy) has a PhD in applied statistics from the Catholic University of Leuven, Belgium. She was a junior quantitative analyst at Nextra Investment Management. She is currently a functionary of the European Commission and researcher at the European Commission DG-Joint Research Centre, Ispra, Italy. She is also co-author of the book \u003ci\u003eGlobal Sensitivity Analysis: The Primer\u003c\/i\u003e published by Wiley.\u003c\/p\u003e  This book is an introductory guide to using Lévy processes for credit risk modelling. It covers all types of credit derivatives: from the single name vanillas such as Credit Default Swaps (CDSs) right through to structured credit risk products such as Collateralized Debt Obligations (CDOs), Constant Proportion Portfolio Insurances (CPPIs) and Constant Proportion Debt Obligations (CPDOs) as well as new advanced rating models for Asset Backed Securities (ABSs).  \u003cp\u003eJumps and extreme events are crucial stylized features, essential in the modelling of the very volatile credit markets - the recent turmoil in the credit markets has once again illustrated the need for more refined models.\u003c\/p\u003e \u003cp\u003eReaders will learn how the classical models (driven by Brownian motions and Black-Scholes settings) can be significantly improved by using the more flexible class of Lévy processes. By doing this, extreme event and jumps can be introduced into the models to give more reliable pricing and a better assessment of the risks.\u003c\/p\u003e \u003cp\u003eThe book brings in high-tech financial engineering models for the detailed modelling of credit risk instruments, setting up the theoretical framework behind the application of Lévy Processes to Credit Risk Modelling before moving on to the practical implementation. Complex credit derivatives structures such as CDOs, ABSs, CPPIs, CPDOs are analysed and illustrated with market data.\u003c\/p\u003e  \"Schoutens and Cariboni are two of a horrifyingly small number of authors who realize that something had to be done about credit modelling. Theirs won't be the final word on the subject but it's better than almost everything else that's been written.\"\u003cbr\u003e —\u003cb\u003ePaul Wilmott, wilmott.com\u003c\/b\u003e  \u003cp\u003e\"The book casts great light on the intricacies of structured products valuation at a time when credit jumps play a key role in the understanding of credit events.\"\u003cbr\u003e —\u003cb\u003eGuido Bichisao, Head of Financial Engineering and Advisory Services, European Investment Bank\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\"Lévy processes represent a quantum leap over the continuous processes that\u003cbr\u003e have previously been used in credit modeling.\"\u003cbr\u003e —\u003cb\u003ePeter Carr, Head of Quantitative Research, Bloomberg LP and Director of Master Program in Mathematical Finance, NYC\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\"I recommend with pleasure the expert exposition of what real expertise has attained in an undoubtedly difficult yet critical arena of the financial markets. When such insight, intuition and intellectual perseverance offer leadership, it is foolhardy to look the other way. The book is must learn for all professionals.\"\u003cbr\u003e —\u003cb\u003eProfessor Dilip Madan, University of Maryland - Robert H. Smith School of Business\u003c\/b\u003e\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989526069477,"sku":"NP9780470743065","price":152.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470743065.jpg?v=1761784462","url":"https:\/\/k12savings.com\/products\/levy-processes-in-credit-risk-isbn-9780470743065","provider":"K12savings","version":"1.0","type":"link"}