The Credit Market Handbook

Don't pay too much attention to the title of this book. I hardly consider it a handbook. But if you are studying credit risk modeling, you may be very interested in what it has to offer. It is the sort of book you would graduate to after reading elementary books on structural and reduced form models—books like Bluhm et al (2002) or Duffie and Singleton (2003). Assuming theoretical knowledge of those models, it offers hands-on experience with how those models might be applied to solve problems.

 

The book is an edited collection of articles on credit risk that have appeared in the fledgling Journal of Investment Management. Fong is the editor of that journal. Most of the articles deal with structural or reduced form models, but there are also articles on recovery risk, credit correlation, rating transitions and junk bond pricing. Because all are research articles, they bring to life the theory you might have learned in other books.

Contents

Introduction.

Executive Summaries.

1. Estimating Default Probabilities Implicit in Equity Prices (Tibor Janosi, Robert Jarrow and Yildiray Yildirim).

2. Predictions of Default Probabilities in Structural Models of Debt (Hayne E. Leland).

3. Survey of the Recent Literature, Recovery Risk (Sanjiv R. Das).

4. Non-Parametric Analysis of Rating Transition and Default Data (Peter Fledelius, David Lando and Jens Perch Nielsen).

5. Valuing High Yield Bonds: A Business Modeling Approach (Thomas S. Y. Ho and Sang Bin Lee).

6. Structural Versus Reduced Form Models A New Information Based Perspective (Robert A. Jarrow and Philip Protter).

7. Reduced Form Vs. Structural Models of Credit Risk: A Case Study of Three Models (Navneet Arora, Jeffrey R. Bohn and Fanlin Zhu).

8. Implications of Correlated Default for Portfolio Allocation to Corporate Bonds (Mark B.Wise and Vineer Bhansali).

9. Correlated Default Processes: A Criterion-Based Copula Approach (Sanjiv R. Das and Gary Geng).

All the articles are well written, informative and insightful. While I primarily recommend the book to people who are fairly new to credit risk modeling, even more experienced readers will find much of interest here. I recommend the book. [3/28/06]
 

For related books, see sections:

Risk Management - Credit Risk

Financial Engineering - Pricing Credit Risk

 

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