Credit Derivatives: Trading, Investing, and Risk Management 2nd Edition

Credit derivatives

“Geoff has pulled out all the stops to create the ultimate guide to OTC credit. A fantastic introduction to structured credit combined with insightful analysis on the issues affecting the industry today.”

Simon Mott, Head of Marketing, Credit Market Analysis

“Practical, clear, useful and thorough the second edition brings the book up to date and gives anyone with an interest in credit derivatives (investors, risk managers, traders, senior management, auditors and control functions) a sound knowledge of the subject.”

Robert Baker, Reoch Credit Partners

“The first edition has become somewhat of a ‘must have’ on the shelf of anyone interested in credit derivatives. Unlike a lot of his peers, Geoff Chaplin manages to write a book in a way that is both easily accessible and practically useful; and without economizing on the academic rigour. I found it both eminently readable and peppered with realistic examples. Furthermore it challenges the reader to discover the intricacies of the credit derivative market for themselves by providing them with industry standard tools. The new addition updates the reader on the more recent developments in the credit derivative market; touching upon both the rationale as well as the math. I cannot recommend it more highly!”

Darren Smith, Head of Credit Structuring, WestLB A

G

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

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

The book concentrates on practical issues and develops an understanding of the products through applications and detailed analysis of the risks and alternative means of trading. It provides:

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

The book is thoroughly updated to reflect the changes the industry has seen over the past 5 years, notably with an analysis of the lead up and causes of the credit crisis. It contains 50% new material, which includes copula valuation and hedging, portfolio optimisation, portfolio products and correlation risk management, pricing in illiquid environments, chapters on the evolution of credit management systems, the credit meltdown and new chapters on the implementation and testing of credit derivative models and systems. The book is accompanied by a website which contains tools for credit derivatives valuation and risk management, illustrating the models used in the book and also providing a valuation toolkit.