Credit Derivatives: A Primer on Credit Risk, Modeling, and Instruments

Now, theres a completely up-to-date guide on credit derivatives thats ideal for all working financial professionals and students entering the field. Credit Derivatives, Second Edition has been fully updated to explain todays credit risk markets clearly and simply, in language any practitioner or advanced business student can understand. The authors begin by explaining the underlying principles surrounding credit risk. Next, they systematically present today's leading methods and instruments for managing it. The authors introduce total return swaps, credit spread options, credit linked notes, and other instruments, demonstrating how each of them can be used to isolate risk and sell it to someone willing to accept it. The authors, including leading practitioner George Chacko, have updated all content throughout to reflect todays instruments, rules, and practices. Every company faces credit risk. Credit derivatives are among the most powerful tools available for managing it. Once restricted to the financial industry, they are now widely used by businesses of all kindsand all financial professionals need to understand them. Credit Derivatives, Revised Edition, explains these tools simply, clearly, and rigorously: what they do, how they work, and how to use them in todays applications. The authors first show how credit risk can be measured and valued. They explain key ideas, such as recovery rates and credit spreads, and show how derivatives transfer credit risk to external investors. Next, they systematically demonstrate how credit risk models can describe and predict credit risk events. They cover structural models, including Merton and Black and Cox; empirical models, such as the Z-score model; and reduced-form models, such as Jarrow-Turnbull. The authors also present detailed explanations of two widely used instruments: credit default swaps (CDSs) and collateralized debt obligations (CDOs). Finally, building on what youve learned, the authors offer a brand-new primer on todays applications for financial instruments with embedded credit risk. FINANCIAL STATEMENT ANALYSIS Perform preliminary financial analysis on any potential project UNDERSTAND, MEASURE, AND ASSESS CREDIT RISK Master core concepts, from credit spreads to default probabilities MASTER POWERFUL CREDIT RISK MODELING APPROACHES Learn structural, empirical, and reduced-form credit risk modeling GAIN DEEP INSIGHT INTO TODAYS INSTRUMENTS AND APPLICATIONS Understand CDSs, CDOs, and how credit-sensitive products are now used FOR EVERY FINANCIAL PRACTITIONER: BUY-SIDE AND SELL-SIDE For CFOs, treasurers, and other practitionerseverywhere from pension funds to commercial corporations