Quantitative credit portfolio management: new techniques for alpha capture (hardback) (series: frank j fabozzi series) Practical Innovations for Measuring and Controlling Liquidity, Spread, and Issuer Concentration Risk Frank J. Fabozzi Series

"For many years, this quantitative research team has offered new insights and helpful support to many institutional investors such as APG. By applying these concepts to the portfolio construction process, we have gained more confidence in the robustness of our portfolios."- Eduard van Gelderen, CIO, Capital Markets, APG Asset Management, Netherlands

"A must-read for all future and current credit portfolio managers. The book is a comprehensive review of the quantitative tools available to better manage the risks within a credit portfolio and combines the right amount of statistical work with practical answers to questions confronting credit managers."- Curtis Ishii, Head of Global Fixed Income, California Public Employees" Retirement System

"The practical orientation of this book on institutional credit portfolio management makes it particularly useful for practitioners. All key areas of interest are well covered."- Lim Chow Kiat, President, GIC Asset Management, Singapore

"This book provides enormous insights for beginning practitioners looking to learn the most advanced credit management techniques. For experienced professionals, it provides a great update and advancement.The book is a must-read for all active players in credit markets given the changes after the recent crisis."- Jan Straatman, Global CIO, ING Investment Management, Netherlands

"Lev Dynkin and his team are the highest authority on fixed income portfolio analytics. Their thoughtful and rigorous quantitative research, unparalleled access to high quality data, and cooperative approach with leading fixed income managers sets them apart."- Carolyn Gibbs and Rich King, Co-Heads of U.S. Taxable Fixed Income and Global High Income, Invesco

"Quantitative Credit Portfolio Management is a one of a kind book addressing everyday issues and topics submitted by investors and practitioners to the QPS team. Practical instructions advocated in this book are best practices that we already rely on in our credit investment process for superior active management."- Ibrahima Kobar, CIO, Fixed Income, Natixis Asset Management, France

"The authors ... industry leaders from Barclays Capital ... have done it again! ... They not only delve into improved risk management metrics, but also reveal helpful strategies to improve both passive and active fund management."- Ken Volpert, CFA, Head of Taxable Bond Group, Vanguard

"This book tackles the Big C*CREDIT. Institutional bond investors have long known to go to Lev and his team with their thorniest and most complex portfolio problems. Here, they lay out a very straightforward exposition of best practices in credit portfolio management."- Ken Leech, former CIO, Western Asset Management Company

A more complete list of endorsements may be found inside the book.

Introduction

Chapter 1 Measuring Spread Sensitivity of Corporate Bonds

Duration Times Spread (DTS)

Analysis of Corporate Bond Spread Behavior

A New Measure of Excess Return Volatility

Refinements and Further Tests

Summary and Implications for Portfolio Managers

Appendix: Data Description

Endnotes

Chapter 2 DTS for Credit Default Swaps

Methodology

Empirical Analysis

Conclusion

Appendix - Quasi-maximum Likelihood Estimation

Endnotes

Chapter 3 DTS for Sovereign Bonds

Spread Dynamics of Emerging Markets

DTS for Developed Markets Sovereigns: The Case of Euro Treasuries

Managing Sovereign Risk Using DTS

Conclusion

Endnotes

Chapter 4 A Theoretical Basis for DTS

The Merton Model: A Zero-Coupon Bond

Dependence of Slope on Maturity

Conclusion

Endnotes

Chapter 5 Quantifying the Liquidity of Corporate Bonds

Liquidity Cost Scores

Liquidity Cost Scores for U.S. Credit Bonds²

Liquidity Cost Scores-Methodology

LCS for Trader-Quoted Bonds

LCS for Non-Trader-Quoted Bonds - The LCS Model

LCS for Pan-European Credit Bonds

Pan-European LCS Model

Using LCS in Portfolio Construction

Using LCS to Create Trade Efficiency Scores (TES)

Conclusion

Endnotes

Chapter 6 Joint Dynamics of Default and Liquidity Risk

Spread Decomposition Methodology

What Drives OAS Differences across Bonds?

How Has the Composition of OAS Changed?

Spread Decomposition Using an Alternate Measure of Expected Default Losses - CDP and CRR

High Yield Spread Decomposition

Applications of Spread Decomposition

Alternate Spread Decomposition Models

Conclusion

Appendix

Endnotes

Chapter 7 Empirical versus Nominal Durations of Corporate Bonds

Empirical Duration - Theory and Evidence

The Relation between Analytical and Empirical Duration

Estimation Methodology and Empirical Analysis

Segmentation in Credit Markets

Potential Stale Pricing and its Effect on Hedge Ratios

Hedge Ratios Following Rating Changes - An Event Study Approach

Summary and Implications for Portfolio Management

Endnotes

Chapter 8 Hedging The Market Risk in Pairs Trades

Empirical Analysis

Conclusion

Appendix - Hedging Pairwise trades with skill

Endnotes

Chapter 9 Positioning Along the Credit Curve: Risk and Reward

Data and Methodology

Empirical Analysis

Conclusion

Endnotes

Chapter 10 The 2007-09 Credit Crisis: Benefits of DTS in Risk Management

Spread Behavior during the Credit Crisis

Applications of DTS

Advantages of DTS in Risk Model Construction

Conclusion

Endnotes

Chapter 11 A Framework for Diversification of Issuer Risk

Downgrade Risk Before and After the Credit Crisis

Using DTS to Set Position Size Ratios

Comparing and Combining the Two Approaches to Issuer Limits

Conclusion

Endnotes

Chapter 12 How Best to Capture the Spread Premium of Corporate Bonds?

The Credit Spread Premium

Measuring the Credit Spread Premium for the IG Corporate Index

Alternative Corporate Indices

Capturing...