Business 864
Readings

Primary textbook is:  David Lando, Credit Risk Modeling, Princeton University Press, 2004.  We will also make use of  portions of  Michel Crouhy, Dan Galai, and Robert Mark, Risk Management, McGraw-Hill, 2001.   A number of supplementary texts and reference books that you might find useful on various topics have been put on reserve at the Belzberg Library (reserve.pdf)

For quick overview on particular instruments and topics, check John Hull, Options, Futures and Other Derivatives, 2003 or 2005.  For introduction to continuous time stochastic processes, treatment of arbitrage pricing, and numerical methods in Excel/VBA, see also Kerry Back,  A Course in Derivative Securities: Introduction to Theory and Computation, 2005.

The list of readings will grow as the course evolves ....

  1.  Background and overview
    Lando, introduction and chap 1
    O'Kane and Schlogl, "Modelling Credit: Theory and Practice," Lehman Bros 2001 (Lehman_2001_CreditModelling.pdf )     
              Financial Calculus: An Introduction to Derivative Pricing, Chap. 1, Martin Baxter and Andrew Rennie, 1996  (Rennie and Baxter (1996))
    "Credit Risk Models, Capital Standards and Self-regulation," Jones 2000 (Jones2000osfi.pdf)
              "Credit Risk Modeling and Valuation: An Introduction", Kay Giesecke 2002 (Giesecke_2002_Credit_Risk_Modeling_and_Valuation.pdf)

  2. Financial regulation and capital requirements
    "Regulatory Capital", in Christopher Culp, The Art of Risk Management, John Wiley & Sons 2002 (Culp_2002_Chap8_RegulatoryCapital.pdf)
    "International Convergence of Capital Measurement and Standards", Basle Committee on Banking Supervision, July 1988 (BIS_1988_Accord.pdf)
    "Overview of the New Basel Capital Accord", Bank for International Settlements, April 2003 (BISaccord03draftoverview.pdf)
              "The Credit Derivatives Market", David Rule, Bank of England 2001 (BoE_Credit_Derivatives_Market.pdf)

  3. Recovery rates on defaulted debt
    "Almost everything you wanted to know about recoveries on defaulted bonds," Altman and Kishore, Financial Analysts Journal 1996 (AltmanKishore)
    "Default recovery rates in credit risk modeling: A review of the literature," Altman, Resti and Sironi 2003 (AltmanRestiSironi2003)

  4. Investment bank research materials: credit derivatives
              "Introduction to Default Swaps", Dominic O'Kane, Lehman Brothers, Jan 2000 (OKane_2000_IntroDefaultSwaps.pdf)
    "Valuation of credit default swaps," O'Kane and Turnbull, Lehman Bros 2003 (OKaneTurbull2003Lehman.pdf)
    "Credit Portfolio Modeling Handbook," Credit Suisse First Boston 2004 (CSFBHandbook.pdf)
              "Credit Derivatives Explained: Markets, Products, ...", Dominic O'Kane, Lehman Brothers, Mar 2001 (OKane_2001_CreditDerivativesExplained.pdf)
              "Credit Spreads Explained", Dominic O'Kane and Saurav Sen, Lehman Brothers, Mar 2004 (OKane_2004_CreditSpreadsExplained.pdf)
              "Guide to Exotic Credit Derivatives", Dominic O'Kane et al, Lehman Brothers, 2003 (Lehman_2003_ExoticCreditDerivatives.pdf)
              "Nth to default swaps and notes", Laurie Goodman et al, UBS Warburg 2003 CDO Insight  (UBS_CDO_Insight2003.pdf)
              "Product Note: The Layman's Guide to Implied Correlation", Morgan Stanley 2004  (MS_Prod_Note_Correlation_051504.pdf)
              "On Default Correlation: A Copula Function Approach", David Li, Riskmetrics 2000  (Li_2000_Default_Correlation_Copula_Approach.pdf)
              "Credit Derivatives and Structured Credit Products", Giesecke 2002  (Giesecke_2002_Cred_Derivs_and_Struct_Cred_Prods.pdf)
              "Base Correlation Explained", O'Kane and Livesey, Lehman Brothers 2004 (OkaneLivesey_Lehman_2004_BaseCorr.pdf)

  5. Investment bank research materials: securitization
              "Securitization 101", Sunil Gangwani, Deloitte and Touche,  July 1998 (Deloitte_1998_Securitization.pdf)
              "European Securitization: A Resource Guide", European Securitization Forum (ESF_ABS_intro.pdf)
              "Guide to Pass-through and Collateralized Mortgage Securities", The Bond Market Association (BondMarketAssn_CMO_guide.pdf)
              "Guide to Collateralized Mortgage Obligations", Alexander Crawford, Deutsche Bank Research, Oct 2003 (DBGMresearch_2003_CMO_intro.pdf)
              "Canadian CMBS: Market Developments and Growth", Stephan Schwartz, Deutsche Bank Research, Feb 2002 DBresearch_2002_CMBS_canadian.pdf)
              "Asset Backed Commercial Paper Explained", Deborah Seife, Fitch Ratings, Nov 2001 (Fitch_2001_ABCP_intro.pdf)
              "Alternative Student Loan ABS", Katie Reeves, Deutsche Bank Research, Nov 2003 (DBGMresearch_2003_StudentLoanABS.pdf)
              "Credit Card ABS: An update ...", Katie Reeves, Nov 2002 (DBGMresearch_2002_ABS_creditcard.pdf)

  6. Monte Carlo and statistical models
              " The Monte Carlo Framework", Martin Haugh, 2004 (Haugh_2004_MonteCarloFramework.pdf)
              "Poisson Processes", Ross 2004 (Ross_2004_PoissonProcesses.pdf)
              "Rating Transitions:  Historical Patterns and Statistical Models", Duffie and Singleton, chap 4, 2003 (DuffieSingleton_2003_Chap_4.pdf)

  7. Credit scoring
              "Statistical Classification Methods in Consumer Credit Scoring:  A Review", D. J. Hand, W. E. Henley, JRSS, 1997 (HandHenley1997JRSS.pdf)
              "Credit Granting: A Comparative Analysis of Classification Procedures", V. Srinivasan and Y. Kim, J. Finance, 1987 (SrinivasanKim1987JF.pdf)
              "A Discrete Variable Chain Graph for Applicants for Credit", E. Stanghellini et al, Applied Statistics, 1999  (Stanghellini1999JRSS.pdf )
              "Default Risk: Quantitative Methodologies", Chap 3 of A. de Servigny and O. Renault, Measuring and Managing Credit Risk, 2004

  8. Miscellaneous
               Global Derivatives 2006 conference brochure ( GlobalDerivs06_brochure.pdf )


  9. Links to course-relevant other places