Product Description

Since its inception, the market for credit derivatives has shown impressive growth and is expected to hit a volume of more than $4.8 trillion by 2004. Credit derivatives have begun to transform modern banking; they have become a standard instrument for the management of default risk; they are being used for risk management and hedging as well as for speculation, balance-sheet management and regulatory capital purposes.

Despite their great usefulness, even established professionals often feel insecure when it comes to the quantitative analysis of the prices and risks of credit derivatives. Confronted with a bewildering variety of fundamentally different pricing approaches, it can be very challenging to understand their relative advantages and disadvantages and to choose the "correct" one for the problem at hand.

In this book, the author carefully explains the different pricing models for credit derivatives in a very application-oriented way. Based on his wide experience in professional training for credit derivatives analysis, the models are developed with a view to their application to real pricing problems rather than just presenting the theory.

Philipp Schönbucher is one of the most talented researchers of his generation. He has taken the Credit Derivatives world by storm. In this book he carefully explains the concepts and the mathematics behind all of the most important and popular credit risk models. Professor Schönbucher has filled an important gap on the quantitative finance bookshelf. –Paul Wilmott

The reader is presented with a clear, concise and readable treatment of credit pricing models that will appeal to practitioners and academics. It provides a useful roadmap to the many daily challenges that face practitioners. It will become a standard reference.
–Stuart M. Turnbull, Senior Vice President, Fixed Income Research, Lehman Brothers, NY

"This is the most comprehensive, and also the clearest, book on the details of constructing credit risk models that I have read. Throughout, it is directly useful for general value-at-risk credit modelling as well as its stated focus of credit derivatives. Readability is greatly enhanced by its step-by-step organization across what has grown to be a large topic area and the focus of its single author, as opposed to a collection of disjointed papers. Alternative modelling frameworks are written in a common notation and the reader is given all the details needed for direct implementation. The author, Philipp Schönbucher, is clearly one of the top researchers in this area, even before the writing of this book." –Greg M Gupton, DefaultRisk.com

"Philipp addresses a wide range of modelling issues in the fast growing market of credit derivatives. He covers a broad spectrum of topics starting with the simple everyday trading tools while gradually building up to the more complex mathematical models. It successfully bridges the gap between academia and practice in an elegant and easy style, making it a valuable book for a wide audience"  –Ebbe Rogge, Product Development Group, Financial Markets, ABN AMRO

Product Details

• Amazon Sales Rank: #113444 in Books
• Published on: 2003-03-01
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 600 pages

From the Inside Flap
In this book, Philipp Schönbucher covers all the important modelling approaches from hedge-based pricing to stochastic-intensity models, credit rating models and firm's value based models, concluding with a large chapter on portfolio credit risk models. The author builds the models starting from simple basic models, introducing complexity only where it is needed, and explaining implementation, data collection and calibration on the way. The advantages and disadvantages of the different pricing approaches are clearly confronted, and the effects of hidden assumptions on the output of the models are identified.

The book is an indispensable tool for credit derivatives traders, quantitative analysts, software developers, risk managers, regulators, auditors, and anybody interested in how credit derivatives are priced.

From the Back Cover
Since its inception, the market for credit derivatives has shown impressive growth and is expected to hit a volume of more than $4.8 trillion by 2004. Credit derivatives have begun to transform modern banking; they have become a standard instrument for the management of default risk; they are being used for risk management and hedging as well as for speculation, balance-sheet management and regulatory capital purposes.

Despite their great usefulness, even established professionals often feel insecure when it comes to the quantitative analysis of the prices and risks of credit derivatives. Confronted with a bewildering variety of fundamentally different pricing approaches, it can be very challenging to understand their relative advantages and disadvantages and to choose the "correct" one for the problem at hand.

In this book, the author carefully explains the different pricing models for credit derivatives in a very application-oriented way. Based on his wide experience in professional training for credit derivatives analysis, the models are developed with a view to their application to real pricing problems rather than just presenting the theory.

Philipp Sch& #246;nbucher is one of the most talented researchers of his generation. He has taken the Credit Derivatives world by storm. In this book he carefully explains the concepts and the mathematics behind all of the most important and popular credit risk models. Professor Schönbucher has filled an important gap on the quantitative finance bookshelf.
Paul Wilmott

The reader is presented with a clear, concise and readable treatment of credit pricing models that will appeal to practitioners and academics. It provides a useful roadmap to the many daily challenges that face practitioners. It will become a standard reference.
Stuart M. Turnbull, Senior Vice President, Fixed Income Research, Lehman Brothers, NY

"This is the most comprehensive, and also the clearest, book on the details of constructing credit risk models that I have read. Throughout, it is directly useful for general value-at-risk credit modelling as well as its stated focus of credit derivatives. Readability is greatly enhanced by its step-by-step organization across what has grown to be a large topic area and the focus of its single author, as opposed to a collection of disjointed papers. Alternative modelling frameworks are written in a common notation and the reader is given all the details needed for direct implementation. The author, Philipp Schönbucher, is clearly one of the top researchers in this area, even before the writing of this book." Greg M Gupton, DefaultRisk.com

"Philipp addresses a wide range of modelling issues in the fast growing market of credit derivatives. He covers a broad spectrum of topics starting with the simple everyday trading tools while gradually building up to the more complex mathematical models. It successfully bridges the gap between academia and practice in an elegant and easy style, making it a valuable book for a wide audience" Ebbe Rogge, Product Development Group, Financial Markets, ABN AMRO

About the Author
Dr. Philippe J. Schonbucher is a professor at the University of Bonn, Germany, and has degrees in mathematics from Oxford University and a PhD in economics from Bonn University. He has taught various training courses organized by ICM and CIFT, and lectured at risk conferences for practitioners on credit derivatives pricing, credit risk modeling, and implementation.

Customer Reviews

Amongst the best of a bad lot
The state of theory is in such tremendous flux at present with a majority of research unpublished and a growing consensus that the state of the art is entirely inadequate. No book could possibly please industry researchers at this point, but Philipp contributes some ideas and clarification here and there and some leads which are valuable. He is perhaps a little dismissive and pessimistic when the theory wanders into hard mathematical problems, and to to a large extent his book ends where the fun stuff begins. Nontheless I would recommend, especially to those entering the field.

Excellent intermediate book
The book is a look at credit risk through the glasses of mathematics, and is not a beginner's book. It is a bit dry in the beginning, yet after that I discovered lots of valuable intuitive explanations. While it does require a certain level of probability knowledge, the author walks you through most necessary steps for the presented models. The book covers almost everything needed for an intermediate course on credit modelling. The lack of numerical implementation menthods took the last star.

Very Detailed
A very useful text for those who need to understand how to implement a model. In finance, notation and concepts vary widely across different authors and it is often uncertain what the equations behind the model mean. It is helpful to be able to walk through Schonbucher's detailed explanations of assumptions and key ideas within each alternative model choice. His writing in this book is clearer than his earlier papers.