Credit Derivatives
By George Chacko, Anders Sjoman, Hideto Motohaski and Vincent Dessain
272 pages
Wharton School Publishing; 1st edition (June 2, 2006)
ISBN: 0131467441
Rating – 5 stars
If you are new to the
burgeoning credit risk market, this is the book. Anyone who has lent money
worries about the risk of default. What to do about that worry is of course a
different story. Enter credit derivatives.
Using clear language
concisely, the authors explain the basics of the credit market, credit
derivatives, how they work and how to use them.
They explain how credit risk
valued and measured. Key concepts, such as credit spreads and risk transfer are
covered in a thoughtful and thorough fashion. In my reading, I have not found a
better explanation of the role of this market and its functions.
Moving into second part of the book, the authors tackle
credit risk models, how they can be used to describe and predict risk events.
They discuss three approaches: structural models, such as the Merton, Black and
Cox; empirical models such as Z-score and reduced form models, such as Jarrow-Turnbull.
Finally the authors describe actual credit derivatives,
total return swaps, credit spread options and credit linked notes. They devote
two chapters to collateral debt options and credit default swaps.
Obviously this is not a book for a seasoned professional.
However, if you are new to this market or perhaps simply worried about the risk
of being repaid on some money you have lent this book will provide you with the
background and understanding required to deploy credit risk strategies
effectively and confidently.
Posted by the Pointed Pundit
October 24, 2006
10:57:30 AM
