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5

I could not find any such detailed documentation after some weeks of looking (not non-stop obviously). It is appallingly documented. I do understand fully what it does though so am happy to field some questions on it if you like. In a nutshell, I can tell you it is a standard reduced-form credit model under a constant hazard rate (i.e. homogeneous Poisson ...


3

This is, of course, a very old play. The main thing that gets in the way of trading it is that puts are rarely available in a quantity that matches typical credit instrument notionals. Here's a decent paper by Peter Carr on the topic, see equation (4) and surrounding.


2

"One of the attractive features of the logistic function is the fact that it is bounded between 0 and 1, making it suitable to represent probabilities. " "The Poisson intensity model introduced in this article still has serious shortcomings despite the major advancement offered by its dynamic features. First, it is known to be unable to properly capture the ...


2

CDX is available from Bloomberg at no extra cost, though they do not (so far as I know) form a total-return series that takes rolls into account. See, for example, CDX HY CDSI S19 5Y PRC Corp or Bloomberg ID CXPHY519.


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In this context, I believe carry refers to the sum of "pure" carry + roll down. Carry, in the most general sense, is the return of a position in a static world; i.e., assuming time is the only variable that is changing, what's your holding period return on a trade? When you buy a bond, the "total carry" is the sum of 1) "Pure" carry – you get interest ...


2

Most, but far from all, companies maintain a relatively steady debt load. When a bond matures, they fund its principal payout with a new bond. Sometimes companies do take on more and more debt, meaning that CDS protection sold during earlier times of small debt loads becomes more valuable (and underpriced, from the point of view of the protection seller). ...


2

It depends on how one is thinking about the hedge. One might be thinking of it as A hedge against catastrophic risk (default of the issuer), or A hedge against changes in (market-implied) default intensity or hazard rate In the former case, which seems to be how you are considering it, the hedge is a static hedge, kept for up to 5 years, and insulates ...


2

Firstly, the use of the logit models to estimate the PDs is particularly appreciated in some credit industries, as, for instance, the credit retail one. The logit model predicts pretty well the PD on loans, consumer credit, credit cards, ... and all concerns the retail consumer world. Mainly, those listed are the principal sub-industries in the credit ...


2

As regards the free sources, the best place where you can find material about credit risk management is defaultrisk.com; it is a website where are collected (almost) all academic (and not) articles and working paper, references and researchers. Moreover, as regards the forums, I think you should try visiting Credit Risk Group at Linkedin; it is a very ...


1

I cannot suggest some reference particularly, since the field is going to develop day by day, but, generally, you could take a look to: Engelmann, Bernd, and Robert Rauhmeier, eds. The Basel II risk parameters: estimation, validation, and stress testing. Springer Science & Business Media, 2006. Particularly, look at the chapter 4 and 5; the ...


1

Crouhy, Mark and Galai's book Risk Management is about all aspects of risk management for investment banks, including credit risk of course. If you need to focus on one book, it is this one.


1

IMHO, I suggest you to read: Sironi, Andrea, and Andrea Resti. Risk management and shareholders' value in banking: from risk measurement models to capital allocation policies. Vol. 417. John Wiley & Sons, 2007. I studied that during the university for my risk management classes and I still find it enlightening and informative. The mathematics ...


1

There exist 3 kind of models for credit portfolio management: Structural models (as, for instance, the KMV's based-models or credit-metrics models); Actuarial (or intensity) models; Macro-Factors (or econometrics) models; I suggest you to read Derbali (2012), that's a simple paper that explains the main features and the differences among those kinds of ...


1

If you are looking for a rigorous mathematical definition, there isn't one. A margin of conservatism is broadly defined here to be the additional amount in model estimates relative to actual outcomes. This definition will differ depending on the model in question; where for some it may be interpreted as low threshold above some metric of accuracy, while ...


1

Firstly it's good to straighten out our goal. You correctly say, that IFRS9 requires analysis of expected losses. There are two components of expected losses. 1) Expected probability of a default event 2) Expected recovery rate So, not only do we need the probability but also the recovery rate. Luckily, both are approximated by the credit spread, which ...


1

The rules relating to mark-to-market accounting have always been, in my opinion, ridiculous. Citigroup have to mark their liabilities to a fair value, and in this case, where it is their own debt, part of the pricing require that they consider the potential of their own default. The more likely it becomes, that the bank defaults the less the banks swaps is ...


1

As I see it, the term $\Pi_B(t, T)$ is the value of the derivatives already owned by the bank. So, it's not some price they need to pay but an asset on the balance sheet. This increase in asset value leads to a profit. Balance sheet Example Imagine the balance sheet of OTC Subsidiary with rating A: Assets | Liabilities ...


1

I don't know a tutorial on the Internet but I have a book on the topic that I think you could be interested in: Counterparty Credit Risk and Credit Value Adjustment: A Continuing Challenge for Global Financial Markets The book is a non-mathematical introduction to counter-party credit risk. It introduces concepts such as wrong-way risk, netting, ...


1

As others have noted, Markit is a great source for this. For CDX in particular, they publish on a daily basis their "Biggest Credit Movers" which includes CDX, iTraxx, iBoxx, Sovereign Credit improvement/deterioration, and Corporate credit improvement/deterioration. Here is a sample report, which you can also sign up to have emailed to you every day. Keep ...


1

Micro finance did not work in certain parts of South Africa. That's not surprising. Neither this, nor anything else is a "panacea" (cure-all) for various financial problems. Micro finance apparently works in SOME parts of the world (India, Bangladesh, etc.), where the ethos and institutional framework make it viable. It may work better with women (who have ...


1

Reuters uses a proprietary model defined StarMine structural/SmartRatios Credit Risk model that has been developed by themselves and provided with the Reuters data service. It does not exist a formal definition or paper about the model, in which it is explained how to get that score; Reuters simply explains roughly what is in its website without going into ...


1

let me try answer my own questions, partially, from below that are exerpted from FRM exam notes. So actually the K above, is UL, though it derives only from PD and maturity, but the G, N and 0.999, actually are calculating the VaR and UL. So, CAR is defined based on EAD and K, while K means UL. the essence is, CAR is to cover Unexpected Loss -- captical ...



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