Book description
Credit derivatives have been instrumental in the recent increase in
securitization activity. The complex nature and the size of the market
have given rise to very complex counterparty credit risks. The Lehman
failure has shown that these issues can paralyse the financial markets,
and the need for detailed understanding has never been greater.
The Art of Credit Derivatives shows practitioners how to put a
framework in place which will support the securitization activity. By
showing the models that support this activity and linking them with
very practical examples, the authors show why a mind-shift within the
quant community is needed - a move from simple modeling to a more
hands on mindset where the modeler understands the trading implicitly.
The book has been written in five parts, covering the modeling
framework; single name corporate credit derivatives; multi name
corporate credit derivatives; asset backed securities and dynamic
credit portfolio management.
Coverage includes:
- groundbreaking solutions to the inherent risks associated with
investing in securitization instruments
- how to use the standardized credit indices as the most
appropriate instruments in price discovery processes and why these
indices are the essential tools for short term credit portfolio management
- why the dynamics of systemic correlation and the standardised
credit indices are linked with leverage, and consequently the
implications for liquidity and solvability of financial institutions
- how Lévy processes and long term memory processes are related to
the understanding of economic activity
- why regulatory capital should be portfolio dependant and how to
use stress tests and scenario analysis to model this
- how to put structured products in a mark-to market-environment,
increasing transparency for accounting and compliance.
This book will be invaluable reading for Credit Analysts,
Quantitative Analysts, Credit Portfolio Managers, Academics and anyone
interested in these complex yet important markets.
Joao Garcia is the Head of the Credit Modelling
team at the Treasury and Financial Markets of Dexia Group in Brussels.
His current work includes credit derivatives, securitization and
structured products, correlation mapping of credit portfolios in
indices, developing strategies and trading signals for credit
derivatives indices and pricing distressed credit instruments. Prior
to this he worked for four years on the construction of a grid system
for strategic credit portfolio management of the whole Dexia Group.
The aim of the system was to mange large portfolios of securitization
notes. Additionally he has experience on methodologies to rate and
price cash flow, CDOs, to allocate credit economic capital and to
price exotic interest rate derivatives. he is an Electronic Eng. from
Instituto Tecnologico de Aeronautica (ITA, Brazil), with a M. Sc. in
Physics (UFPe, Brazil) and a Ph. D. in Physics (UA, Belgium).
Serge Goossens is a senior quantitative analyst working on
credit derivatives and correlation modelling in the Front Office of
Dexia Bank. He has a vast experience with credit derivative
instruments, both rating and pricing for hedging and trading. He has
also focused on mark to model of hard to value distressed assets and
on restructuring the capital structure of large portfolios. From his
previous positions he has extensive expertise in parallel large scale
numerical simulation of complex systems, ranging from computational
fluid dynamics to electronics,. Serge holds a M. Sc. in Engineering
and a Ph. D. from the faculty of Engineering of the K. U.Leuven and a
Master of Financial and Actuarial Engineering degree obtained from the
Leuven School of business and Economics. He has published a number of
papers and he has presented at conferences world-wide.
