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by H. GIFFORD FONG
The Credit Market Handbook: Advanced Modeling Issues
Cover Page
Title Page
Copyright
Contents
Introduction
Executive Chapter Summaries
CHAPTER 1: Estimating Default Probabilities Implicit in Equity Prices
1. INTRODUCTION
2. THE MODEL STRUCTURE
3. DESCRIPTION OF THE DATA
4. ESTIMATION OF THE STATE VARIABLE PROCESS PARAMETERS
5. EQUITY RETURN ESTIMATION
6. ANALYSIS OF THE TIME SERIES PROPERTIES OF THE PARAMETERS
7. ANALYSIS OF FAMA–FRENCH FOUR-FACTOR MODEL WITH NO DEFAULT
8. ANALYSIS OF A BUBBLE COMPONENT (P/E RATIO) IN STOCK PRICES
9. ANALYSIS OF THE DEFAULT INTENSITY
10. RELATIVE PERFORMANCE OF THE EQUITY RETURN MODELS
11. COMPARISON OF DEFAULT INTENSITIES BASED ON DEBT VERSUS EQUITY
12. CONCLUSIONS
NOTES
REFERENCES
APPENDIX
CHAPTER 2: Predictions of Default Probabilities in Structural Models of Debt
1. INTRODUCTION
2. RECENT EMPIRICAL STUDIES
3. STRUCTURAL MODELS AND DEFAULT RISK
4. THE DEFAULT BOUNDARY IN EXOGENOUS AND ENDOGENOUS CASES
5. THE DEFAULT PROBABILITY WITH CONSTANT DEFAULT BARRIER
6. CALIBRATION OF MODELS: THE BASE CASE
7. MATCHING EMPIRICAL DEFAULT FREQUENCIES WITH THE L-T MODEL
8. MATCHING EMPIRICAL DPS WITH THE L-S MODEL
9. THE MOODY'S–KMV APPROACH
10. SOME PRELIMINARY THOUGHTS ON THE RELATIONSHIP BETWEEN THE KMV APPROACH AND L-S/L-T
11. CONCLUSIONS
ACKNOWLEDGMENTS
POSTSCRIPT
APPENDIX
NOTES
REFERENCES
CHAPTER 3: Survey of the Recent Literature: Recovery Risk
1. INTRODUCTION
2. EMPIRICAL ATTRIBUTES
3. RECOVERY CONVENTIONS
4. RECOVERY IN STRUCTURAL MODELS
5. RECOVERY IN REDUCED-FORM MODELS
6. MEASURE TRANSFORMATIONS
7. SUMMARY AND SPECULATION
REFERENCES
CHAPTER 4: Non-Parametric Analysis of Rating Transition and Default Data
1. INTRODUCTION
2. DATA AND OUTLINE OF METHODOLOGY
3. ESTIMATING TRANSITION INTENSITIES IN TWO DIMENSIONS
4. ONE-DIMENSIONAL HAZARDS AND MARGINAL INTEGRATION
5. CONFIDENCE INTERVALS
6. TRANSITIONS: DEPENDENCE ON PREVIOUS MOVE AND DURATION
7. MULTIPLICATIVE INTENSITIES
8. CONCLUDING REMARKS
ACKNOWLEDGMENTS
NOTES
REFERENCES
CHAPTER 5: Valuing High-Yield Bonds: A Business Modeling Approach
1. INTRODUCTION
2. SPECIFICATION OF THE MODEL
3. A NUMERICAL ILLUSTRATION
4. EMPIRICAL EVIDENCE
5. IMPLICATIONS OF THE MODEL
6. CONCLUSIONS
ACKNOWLEDGMENTS
APPENDIX
NOTES
REFERENCES
CHAPTER 6: Structural versus Reduced-Form Models: A New Information-Based Perspective
1. INTRODUCTION
2. THE SETUP
3. STRUCTURAL MODELS
4. REDUCED-FORM MODELS
5. A MATHEMATICAL OVERVIEW
6. OBSERVABLE INFORMATION SETS
7. CONCLUSION
ACKNOWLEDGMENT
NOTES
REFERENCES
CHAPTER 7: Reduced-Form versus Structural Models of Credit Risk: A Case Study of Three Models
1. INTRODUCTION
2. MERTON, VASICEK–KEALHOFER, AND HULL–WHITE MODELS
3. DATA AND EMPIRICAL METHODOLOGY
4. RESULTS
5. CONCLUSION
ACKNOWLEDGMENTS
NOTES
REFERENCES
CHAPTER 8: Implications of Correlated Default for Portfolio Allocation to Corporate Bonds
1. INTRODUCTION
2. A MODEL FOR DEFAULT
3. THE PORTFOLIO PROBLEM
4. SAMPLE PORTFOLIOS WITH ZERO RECOVERY FRACTIONS
5. SAMPLE PORTFOLIOS WITH NONZERO RECOVERY FRACTIONS
6. CONCLUDING REMARKS
ACKNOWLEDGMENTS
NOTES
REFERENCES
CHAPTER 9: Correlated Default Processes: A Criterion-Based Copula Approach
1. INTRODUCTION
2. DESCRIPTION OF THE DATA
3. COPULAS AND FEATURES OF THE DATA
4. DETERMINING THE JOINT DEFAULT PROCESS
5. SIMULATING CORRELATED DEFAULTS AND MODEL COMPARISONS
6. DISCUSSION
ACKNOWLEDGMENTS
APPENDIX: THE SKEWED DOUBLE EXPONENTIAL DISTRIBUTION
NOTES
REFERENCES
Index
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