Credit Risk Modeling

Credit Risk Modeling offers a rigorous introduction to one of the most critically examined subjects in quantitative finance. In this compelling work, David Lando explores the fundamental challenges and tools of the field, presenting two distinct yet interrelated approaches: one grounded in classical option pricing models and the other centered on the direct modeling of default probabilities. The author provides clear insights into each methodology, showing that their boundary is more nuanced than initially perceived. Aimed at researchers, finance students, quantitative analysts, and financial regulators, the book adeptly balances the presentation of core ideas with sufficient detail for model derivation and practical implementation. With comprehensive discussions of model limitations and five detailed technical appendices, readers are equipped to extend, generalize, or refine existing models. Emphasizing both pricing techniques and statistical estimation methods, Credit Risk Modeling remains a key resource for understanding the dynamics of rating-based analysis, dependent defaults, credit default swaps, and other critical applications in modern finance.