Understanding Credit Derivatives and Related Instruments

1st Edition

Authors: Antulio Bomfim Antulio Bomfim
Hardcover ISBN: 9780121082659
eBook ISBN: 9780080481487
Imprint: Academic Press
Published Date: 1st December 2004
Page Count: 368
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Description

The global credit derivatives market is estimated to have grown from virtually nothing in the early 1990s to over $2 trillion dollars. Although still relatively young, the credit derivatives market has already developed to the point where one can characterize its evolution in terms of developments in its various segments, such as the market for single-name credit derivatives or the market for credit derivatives written on sovereign credits.

Understanding Credit Derivatives offers a comprehensive introduction to the credit derivatives market. Rather than presenting a highly technical exploration of the subject, it offers intuitive and rigorous summaries of the major subjects and the principal perspectives associated with them. The centerpiece is pricing and valuation issues, especially discussions of different valuation tools and their use in credit models.

Key Features

  • Offers a broad overview of this growing field
  • Discusses all the main types of credit derivatives
  • Provides back-of-the-book summary of statistics and fixed-income mathematics

Readership

Graduate Students in MBA and specialized finance programs, professionals working with investment tool such as financial analysts and portfolio managers.

Table of Contents

Part I Credit Derivatives: Definition, Market, Uses

1 Credit Derivatives: A Brief Overview
1.1 What are Credit Derivatives?
1.2 Potential \Gains from Trade""
1.3 Types of Credit Derivatives
1.3.1 Single-Name Instruments
1.3.2 Multi-Name Instruments
1.3.3 Credit-Linked Notes
1.3.4 Sovereign vs. Other Reference Entities
1.4 Valuation Principles
1.4.1 Fundamental Factors
1.4.2 Other Potential Risk Factors
1.4.3 Static Replication vs. Modeling
1.4.4 A Note on Supply, Demand, and Market Frictions
1.5 Counterparty Credit Risk (Again)

2 The Credit Derivatives Market
2.1 Evolution and Size of the Market
2.2 Market Activity and Size by Instrument Type
2.2.1 Single- vs. Multi-name Instruments
2.2.2 Sovereign vs. Other Reference Entities
2.2.3 Credit Quality of Reference Entities
2.2.4 Maturities of Most Commonly Negotiated Contracts
2.3 Main Market Participants
2.3.1 Buyers and Sellers of Credit Protection
2.4 Common Market Practices
2.4.1 A First Look at Documentation Issues
2.4.2 Collateralization and Netting
3 Main Uses of Credit Derivatives
3.1 Credit Risk Management by Banks
3.2 Managing Bank Regulatory Capital
3.2.1 A Brief Digression: The 1988 Basle Accord
3.2.2 Credit Derivatives and Regulatory Capital Management
3.3 Yield Enhancement, Portfolio Diversi_cation
3.3.1 Leveraging Credit Exposure, Unfunded Instruments
3.3.2 Synthesizing Long Positions in Corporate Debt
3.4 Shorting Corporate Bonds <BR id=

Details

No. of pages:
368
Language:
English
Copyright:
© Academic Press 2005
Published:
Imprint:
Academic Press
eBook ISBN:
9780080481487
Hardcover ISBN:
9780121082659

About the Author

Antulio Bomfim

Antulio N. Bomfim Senior Managing Director and Co-Head of Monetary Policy Insights at Macroeconomic Advisers, LLC. He received his M.A. and Ph.D. in Economics at the University of Maryland and his M.Sc.in Mathematical Finance at the University of Oxford.

Affiliations and Expertise

Macroeconomic Advisers, LLC, Washington, DC, USA

Antulio Bomfim

Antulio N. Bomfim Senior Managing Director and Co-Head of Monetary Policy Insights at Macroeconomic Advisers, LLC. He received his M.A. and Ph.D. in Economics at the University of Maryland and his M.Sc.in Mathematical Finance at the University of Oxford.

Affiliations and Expertise

Macroeconomic Advisers, LLC, Washington, DC, USA

Reviews

"This enjoyable book on credit derivatives will be useful to both students of finance and practitioners. Bomfim does for credit what Hull does for options, futures and other derivatives." --Kay Giesecke, Visiting Assistant Professor, School of Operations Research and Industrial Engineering, Cornell University "Antulio Bomfin's exploration of the pricing and valuation of credit derivatives is extraordinarily accessible and therefore will serve as an essential primer for those unfamiliar with credit derivative markets. At the same time, the depth of discourse in Understanding Credit Derivatives will be appreciated by experts who seek a better grounding in the fundamental principles of this complex market." -- Heidi Mandanis Schooner, Visiting Professor of Law, George Washington University Law School "Comprehensive in coverage, economical in exposition, very accessible, and a pleasure to read - this book covers the gamut of issues in modern credit modeling in a manner that will appeal to practitioners, academics and students." -- Sanjiv Das, Professor of Finance, Santa Clara University "...offers a comprehensive introduction to the credit derivatives market. Rather than presenting a highly technical exploration of the subject, the book offers intuitive, yet rigorous summaries of the major subjects. Its centerpiece focuses on pricing and valuation issues, especially discussions of different valuation tools and their application to credit models." -- Gunter Dufey, Prof. em., The University of Michigan; Prof. of Banking and Finance, Nanyang Technological University - NBS, Singapore "Understanding Credit Derivatives and Related Instruments" is a most valuable offering in this rapidly expanding area of finance. The book provides an introduction to the credit derivatives market for the uninitiated and then addresses