Credit Risk Valuation Book

1	Introduction	1
2	Contingent Claim Valuation	13
2.1	Valuation in Discrete Time	14
2.2	Valuation in Continuous Time	18
2.3	Applications in Continuous Time	25
2.4	Application in Discrete Time	41
3	Credit Risk Models	47
3.1	Pricing Credit-Risky Bounds	47
3.2	Pricing Derivatives with Counterparty Risk	66
3.3	Pricing Credit Derivatives	70
3.4	Empirical Evidence	73
4	A Firm Value Pricing Model for Derivatives with Counterparty Default Risk	77
4.1	The Credit Risk Model	77
4.2	Deterministic Liabilities	79
4.3	Stochastic Liabilities	85
4.4	Gaussian Interest Rates and Deterministic Liabilities	90
4.5	Gaussian Interest Rates and Stochastic Liabilities	96
4.6	Vulnerable Forward Contracts	99
4.7	Numerical Examples	100
5	A Hybrid Pricing Model for Contingent Claims with Credit Risk	141
5.1	The General Credit Risk Framework	141
5.2	Implementations	149
5.3	Prices of Vulnerable Options	159
5.4	Recovering Observed Term Structures	160
5.5	Default-Free Options on Risky Bonds	162
5.6	Numerical Examples	164
5.7	Computational Cost	171
6	Pricing Credit Derivatives	175
6.1	Credit Derivative Instruments	176
6.2	Valuation of Credit Derivatives	178
6.3	The Compound Pricing Approach	183
6.4	Numerical Examples	189
6.5	Pricing Spread Derivatives with a Reduced-Form Model	194
6.6	Credit Derivatives as Exchange Options	198
6.7	Credit Derivatives with Counterparty Default Risk	205
7	Conclusion	217
A	Useful Tools from Martingale Theory	223
	References	237
	List of Figures	247
	List of Tables	249
	Index	251