Defaultable Bonds and Credit Derivatives

Claus Munk

in Fixed Income Modelling

Published in print June 2011 | ISBN: 9780199575084
Published online September 2011 | e-ISBN: 9780191728648 | DOI:
Defaultable Bonds and Credit Derivatives

Show Summary Details


For bonds and other financial contracts issued by some firms and countries, there is a non-negligible risk that the issuer will default and the holder of the contract will not receive the promised payments. The prices of the contracts will reflect that credit risk. This chapter introduces various key concepts and relations used in the markets for defaultable bonds. The two main modelling frameworks — the structural models and the reduced-form models — are presented with several concrete models studied in detail. The characteristics and possible pricing techniques for the most important credit derivative securities — credit default swaps and collateralized debt obligations — are also explained.

Keywords: credit risk; credit spread; default intensity; default probability; default correlation; credit rating; structural model; reduced-form model; copula; credit default swaps

Chapter.  37880 words.  Illustrated.

Subjects: Financial Markets

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.