This chapter explains how the main types of credit derivatives work and how they are valued. Central to the valuation … of credit derivatives is an estimation of the probability that reference entities will default. The chapter discusses … both the risk-neutral probabilities of default implied from credit spreads and the real-world (physical) default …

We propose a simple but practical methodology for the quantification of correlation risk in the context of credit … derivatives pricing and credit valuation adjustment (CVA), where the correlation between rates and credit is often uncertain or … unmodelled. We take the rates model to be Hull–White (normal) and the credit model to be Black–Karasinski (lognormal). We …

to as PD-LGD correlation (here PD refers to probability of default, which is often used synonymously with default rate …). There is a large literature on modelling stochastic LGD and PD-LGD correlation, but there is a dearth of literature on using … deviation probabilities across a wide variety of PD-LGD correlation models that have been proposed in the literature. …

dieser Basis die durch dynamische Veränderungen des Liquiditätsrisikos bedingten Spread- und Marktwertveränderungen von CDO … CDO-Tranchen simulationsgestützt aufgezeigt werden. …