Structured Credit Portfolio Analysis: Baskets and CDOs

<body stylesrc="../_private/template_title.htm" topmargin="10" leftmargin="10" bgcolor="#FFFFFF" link="#333366" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table3"> <tr> <td width="780" align="center"> <div align="center"> <table border="0" cellpadding="5" cellspacing="0" height="206" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table4"> <tr> <td align="right" height="198" width="1%"> <p align="left"> <img border="0" src="../images/book_bluhm_and_overbeck_(2006).gif" width="135" height="200"></td> <td valign="top" align="left" height="198"> <table border="0" cellspacing="1" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0" id="table5"> <tr> <td colspan="3" width="0%"> <p class="book_title">Structured Credit Portfolio Analysis<br> <font size="3">Baskets and CDOs</font></td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"><img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> <td width="52%" class="book_details_tags" valign="top" height="144" align="left" rowspan="9"> <map name="FPMap6"> <area href="../main/ratings.htm" shape="rect" coords="74, 0, 164, 33"> </map> <img border="0" src="../images_title/bluhm_14.gif" usemap="#FPMap6" width="229" height="159"></td> <td class="book_details" height="112" align="center" width="50%" rowspan="7"> <map name="FPMap5"> <area target="_top" href="http://www.riskbook.com/link_topic/best_of_2006.htm" shape="rect" coords="0, 0, 124, 108"> </map> <img border="0" src="../images/best_of_award_2006.gif" width="125" height="109" usemap="#FPMap5"></td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" height="32" align="center" width="50%" rowspan="2"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="468" id="table6"> <tr> <td> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </div> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table7"> <tr> <td width="50%" valign="top"> <p align="left" class="body"><strong style="font-weight: 400">For anyone who is interested in how CDOs or other instruments linked to baskets of credits are modeled, this book is essential reading. The authors are a well-known team. One is a practitioner and the other an academic. They have published extensively on credit modeling, including the earlier book Bluhm,  Overbeck and Wagner (<a href="../titles/bluhm_overbeck_wagner_(2003).htm">2002</a>). With this latest book, Bluhm and Overbeck walk readers through the state-of-the-art in modeling and pricing CDOs and basket credit derivatives. Default correlations play a critical role, which is why these are often referred to as "correlation products." </strong></p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="130" align="left" id="table8"> <tr> <td width="125"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td><td width="5"> </td> </tr> </table> <p align="left" class="body"><strong style="font-weight: 400">The book is partly a whirlwind survey of relevant literature, and partly a "roll up your sleeves" look at how correlation products are actually being modeled by market makers today. It is technical, but not too technical. There is more prose and exhibits than there is formulas. A few central theorems are formally stated, but proofs are omitted in favor of citing where they can be found in the literature.</strong></p> </td> <td width="50%" valign="top" class="body" rowspan="2"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table9"> <tr> <td width="100%" bgcolor="#333366"> <p class="header_yellow" align="center">Contents</td> </tr> <tr> <td width="100%" class="explanatory_text"> <table border="1" cellpadding="0" cellspacing="5" style="border-collapse: collapse" bordercolor="#CCCCFF" bgcolor="#CCCCFF" width="100%" id="table10"> <tr> <td class="contents_expanded"> <p class="contents_compressed" style="margin-top: 16px; margin-bottom: 12px"> <font face="Verdana, Arial, Helvetica, Sans-Serif" size="2">1. From Single Credit Risks to Credit Portfolios </font> <p class="contents_compressed" style="margin-top: 12px; margin-bottom: 12px"> <font face="Verdana, Arial, Helvetica, Sans-Serif" size="2">2. Default Baskets</font><p class="contents_compressed" style="margin-top: 12px; margin-bottom: 12px"> <font face="Verdana, Arial, Helvetica, Sans-Serif" size="2">3. Collateralized Debt and Synthetic Obligations</font><p class="contents_compressed" style="margin-top: 12px; margin-bottom: 12px"> <font face="Verdana, Arial, Helvetica, Sans-Serif" size="2">4. Some Practical Remarks</font><p class="contents_compressed" style="margin-top: 12px; margin-bottom: 16px"> <font face="Verdana, Arial, Helvetica, Sans-Serif" size="2">5. Suggestions for Further Reading</font></td> </tr> </table> </td> </tr> </table> <p align="left" class="body"><strong style="font-weight: 400">The book isn't perfect. It is one of those books where the authors have extremely important information to communicate but lack the time to do so well. It reads like a first draft, with clarifications or explanations added through footnotes or side comments. The system of notation is unintuitive and cumbersome. The authors would have benefited from embracing the <noindex><a target="_blank" href="http://www.riskglossary.com/Notation.pdf">Financial Notation Project</a></noindex>.</strong></p> <p align="left" class="body"><strong style="font-weight: 400">Despite such minor problems, the book is a goldmine. If you are interested in how correlation products are modeled in practice, I can't imagine you not reading it. There is no other resource like it. Better-written or better organized books may some day follow, or this book may reappear as an improved second edition. For now, the book is unique. Read it.</strong><b>[November 30, 2006]</b></p> <p align="center" class="body"> </p> </td> </tr> <tr> <td width="50%" valign="top"> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" width="100%" bgcolor="#FFFFCC" id="table11"> <tr> <td width="100%" align="left"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </td> </tr> </table> <div align="left"> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" bgcolor="#FFFFCC" id="table12"> <tr> <td width="100%"> <div align="center"> <center> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" bgcolor="#FFFFCC" id="table13"> <tr> <td> <p class="body" style="margin-bottom: 6; margin-left:10"><b><font color="#333366" size="3">For related books, see sections:</font></b></p> <p class="bullet" style="margin-left: 10; margin-top:5; margin-bottom:5"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/risk_management_credit_institutional.htm">Risk Management - Credit Risk</a></p> <p class="bullet" style="margin-left: 10; margin-top:5; margin-bottom:5"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/financial_engineering_credit_risk.htm">Financial Engineering - Pricing Credit Risk</a><p class="body" style="margin-bottom: 5; margin-top:5; margin-left:10"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/markets_industries_credit_derivatives.htm">Markets - Credit Derivative, CDO</a></p> </td> </tr> </table> </center> </div> </td> </tr> </table> </div> </td> <td>  </td> </tr> </table> </div>  <table border="0" style="border-collapse: collapse" width="100%" cellpadding="0" id="table1" bgcolor="#FFFFFF"> <tr> <td colspan="2" height="12"> <p style="margin-top: 0"> </td> </tr> <tr> <td align="right"> <p align="left" style="margin-bottom: 2px"> <noindex><a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Ads by Contingency Analysis.</font></a></noindex></td> <td align="left"> <p align="right" style="margin-bottom: 2px"> <noindex><a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Advertise on this site.</font></a></noindex></td> </tr> <tr> <td align="center" colspan="2">  <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=iframe" allowtransparency="true" background-color="transparent" style="margin: 0px; padding: 0px; border-width: 0px" width="300" height="250" frameborder="0" marginwidth="0" marginheight="0" scrolling="no"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=js" type="text/javascript"> </script> <noscript> <noindex><a href="http://servedbyadbutler.com/go2/;ID=147917;size=300x250;setID=93136"> <img src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=img" border="0" height="250" width="300" alt=""></a></noindex> </noscript><![endif]> </iframe>   </td> </tr> </table> <p align="center" style="margin-top: 20"> <map name="FPMap0_I1"> <area href="http://www.riskbook.com" shape="rect" coords="0, 0, 184, 29" target="_top"></map> <img border="0" src="../images/open_book_riskbook.gif" usemap="#FPMap0_I1" width="185" height="30"></p> <p class="a" align="center"><font face="Arial" size="2"><a href="../main/disclaimer.htm">disclaimer</a></font></p> <p class="a" align="center"><span class="verdana10">website:</span> <noindex><a target="_top" href="http://www.contingencyanalysis.com"> <font size="2" face="Arial">http://www.contingencyanalysis.com</font></a></noindex><br> <span class="verdana10">books direct link:</span> <noindex><a target="_top" href="http://www.riskbook.com"><font size="2" face="Arial">http://www.riskbook.com</font></a></noindex><br> copyright <font face="Times New Roman">©</font> Contingency Analysis, 1996 - current</p> <p class="a" align="center"><map name="FPMap1_I1"> <area target="_top" href="http://www.contingencyanalysis.com" shape="rect" coords="0, 0, 240, 88"> </map><img border="0" src="../images/logo_book_white.gif" usemap="#FPMap1_I1" width="241" height="89"></p>  </body>