Total Rate of Return Swaps (TRORs) What is a TROR? Why TRORs? Hedging with TRORs The difference between a TROR and a default swap The difference between a TROR and an asset swap The difference between a TROR and an equity swap The relationship between a TROR and a Repo Key benefits of TRORs Credit-spread Products Credit-spread options Hedging with credit-spread options Credit-spread forwards Credit-spread swaps When to hedge and with what credit-spread product Summary of Chapter 2 References and Suggestions for Further Readings Questions and Problems Notes The Market for Credit Derivatives Credit Events That Have Led to the Birth of Credit Derivatives Market Size and Products Credit Derivatives Have Been Around in Different Forms The QBI Contract Creditex and CreditTrade Trac-x and Iboxx Summary of Chapter 1 References and Suggestions for Further Readings Questions and Problems NotesĬredit Derivatives Products Default Swaps What is a default swap? Why default swaps? The terminologyģ 3 6 8 9 11 12 12 13 13 14 15 15 15 16 17Ĭontents Features of default swaps The default swap premium The reference obligation What constitutes default? Cash versus physical settlement Hedging with default swaps Does a default swap hedge credit deterioration risk? Does a default swap hedge against market risk? Types of default swaps Key benefits of default swaps What is Credit Risk? What are Credit Derivatives? Why Credit Derivatives? Simple Approaches Structural Models Reduced Form Models
Introduction The Basics of Credit Derivatives For further information on Blackwell Publishing, visit our website: Contents Overview Furthermore, the publisher ensures that the text paper and cover board used have met acceptable environmental accreditation standards. Set in 11 on 13 Perpetua by SNP Best-set Typesetter Ltd., Hong Kong Printed and bound in the United Kingdom by MPG Books, Bodmin, Cornwall The publisher’s policy is to use permanent paper from mills that operate a sustainable forestry policy, and which has been manufactured from pulp processed using acid-free and elementary chlorine-free practices. HG6024.A3M436 2005 332.63¢2–dc22 2004017623 A catalogue record for this title is available from the British Library. Includes bibliographical references and index. First published 2005 by Blackwell Publishing Ltd Library of Congress Cataloging-in-Publication Data Meissner, Gunter, 1957– Credit derivatives: application, pricing, and risk management/Gunter Meissner.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs, and Patents Act 1988, without the prior permission of the publisher. © 2005 by Gunter Meissner BLACKWELL PUBLISHING 350 Main Street, Malden, MA 02148-5020, USA 108 Cowley Road, Oxford OX4 1JF, UK 550 Swanston Street, Carlton, Victoria 3053, Australia The right of Gunter Meissner to be identified as the Author of this Work has been asserted in accordance with the UK Copyright, Designs, and Patents Act 1988. Credit Derivatives Application, Pricing, and Risk ManagementĪn Interactive Book with Pricing Models and Examples on the Internet
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