Customer Reviews

Credit Risk Valuation

5 star:		(4)
4 star:		(0)
3 star:		(1)
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This books presents the latest research in counterparty risk pricing. As my company (one of the major securities firms here in New York) is currently looking to implement counterparty risk pricing models, this book was just what I was look-ing for. It consists of one chapter on derivatives pricing (Black/Scholes, Heath/Jarrow/Morton, etc etc, all in there), one chapter on general credit risk pricing, two chapters on the valuation of counterparty credit risk (the real core of the book), one chapter on credit derivatives (somewhat short). If you are interested in counterparty risk pricing or need to implement such models, look no further than chapter 4 and 5 of this book. A word of caution, though: while this book is no doubt a wonderful find for the mathematically gifted, it is definitely not for the faint of heart. It is clearly targeted towards researchers and practitioners with advanced mathematical and modeling skills. If your mathematical background topped out with an MBA statistics course, you will choke on this book. Otherwise, and if you are interested in counterparty risk pricing of derivatives, you'll find this book to be a highly valuable resource.

This is an extremely innovative book on counterparty risk, not your standard lame textbook full of old stuff that everybody knows already. Focus is counterparty risk of derivatives but it also has some stuff on credit derivatives. The best part are clearly the chapters on counterparty risk. Now, this book is written for people with a strong math background; it is not an easy read. But for the few out there interested in counterparty risk and quantitative modeling techniques like me, this is a gem.

This book discusses credit risk valuation in detail and quantitatively. The book is very strong on counterparty credit risk of derivatives. That is really the focus, though it also has stuff on general credit risk and credit derivatives (I wish it had more on credit derivatives). It also offers a chapter on general option pricing and risk-neutral valuation principles (brief but very good). What I also liked was the appendix with a short description of the more important and more advanced mathematical concepts used in the book. Although (or perhaps because) not an easy read but rather terse and demanding, I found it to be an extremely valuable resource. It really helped me understand the subject matter and gave me a good idea of how to model such risks.

The book looks neat at first sight and I like its style and organization, suitable for an elementary course in credit risk. But there are so many mistakes in the book, say, pages 28, 49, etc... Those mistakes can be easily avoided by a more careful reading through. In addition, there are few real life examples in the book.

A 3rd edition is definitely needed.

This is probably still the best book on the valuation of credit risk. It is concise, rigorous, yet with many examples and a good treatment of implementation issues.