CDS Delivery Option (Hardcover)

List of Illustrations.

Introduction.

Part I Markets and Mechanisms.

Chapter 1 Interest Rate Policy, Housing Prices, and the Credit Crunch.

An Unspoken Assumption.

The Music Stops in Home Prices.

The Music Stops in Lending.

The Music Stops on Wall Street.

Fed in a Box.

Chapter 2 The Crisis After Subprime.

Agencies Born of Crisis.

Contradictory Objectives?

The Golden Goose.

Losing Focus.

Chapter 3 The Link Between Credit Derivatives and Bonds.

Caulis Negris.

The Music Stops for the Agencies.

The End Game for the Government-Sponsored Enterprises.

Part II The Delivery Option.

Chapter 4 Delivery Option: The Link Between Futures and Credit Derivatives.

Assumptions Behind the Credit Default Swap Basis.

Default Probability, Corporate Debt, and the Delivery Option.

A Review of Treasury Futures Mechanics.

Pricing Treasury Futures Delivery Options.

The Fair-Value Method for Pricing an Embedded Option.

Chapter 5 The Squeeze.

Making Mischief.

Distorted Economics.

Chapter 6 The Cheapest-to-Deliver Option in Credit Default Swaps.

Quantifying the Value of the Delivery Option.

A Proof by Contradiction.

Applying the Fair-Value Analysis.

More Lessons from the Futures Market.

Chapter 7 Delphi: A Real-World Example.

Recent Developments: Destroying Value.

Part III Contract Design.

Chapter 8 Designing an Agency Credit Derivatives Futures Contract.

Chapter 9 Bringing the Index to an Exchange.

Part IV A Bear Market Case Study.

Chapter 10 The ABX Meltdown.

Index.