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This book will be an important reference for practitioners involved with managing portfolios sensitive to credit risk. Graduate students and researchers in mathematical finance, financial engineering, finance and probability will also benefit from the book.

1. Introduction to Credit Risk.- 2. Corporate Debt.- 3. First-Passage-Time Models.- 4. Hazard Function of a Random Time.- 5. Hazard Process of a Random Time.- 6. Martingale Hazard Process.- 7. Case of Several Random Times.- 8. Intensity-Based Valuation of Defaultable Claims.- 9. Conditionally Independent Defaults.- 10. Dependent Defaults.- 11. Markov Chains.- 12. Markovian Models of Credit Migrations.- 13. Heath-Jarrow-Morton Type Models.- 14. Defaultable Market Rates.- 15. Modeling of Market Rates.- References.- Basic Notation.

Mathematical finance and financial engineering have been rapidly expanding fields of science over the past three decades. The main reason behind this phenomenon has been the success of sophisticated quantitative methodolo gies in helping professionals manage financial risks. It is expected that the newly developed credit derivatives industry will also benefit from the use of advanced mathematics. This industry has grown around the need to handle credit risk, which is one of the fundamental factors of financial risk. In recent years, we have witnessed a tremendous acceleration in research efforts aimed at better comprehending, modeling and hedging this kind of risk. Although in the first chapter we provide a brief overview of issues related to credit risk, our goal was to introduce the basic concepts and related no tation, rather than to describe the financial and economical aspects of this important sector of financial market. The interested reader may consult, for instance, Francis et al. (1999) or Nelken (1999) for a much more exhaustive description of the credit derivatives industry.