Introduction to the Analysis of Interest Rate and Credit RisksCredit risks

Patrice Poncet () and Roland Portait
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Patrice Poncet: ESSEC Business School
Roland Portait: ESSEC Business School

Chapter 5 in Capital Market Finance, 2022, pp 149-176 from Springer

Abstract: Abstract Since interest rate fluctuations are random, the dependency of the prices of fixed-income instruments on these rates induces an interest rate risk. The risk of default on the part of a borrower may add on this risk and justifies the “credit spread” which is a component of the rate charged by the lender. This chapter is an introduction to such interest rates and credit risks, which are revisited more thoroughly in later chapters. The principal factors explaining the sensitivity to interest rates of fixed-income securities and simple quantitative estimates of interest rate risk are discussed first. A simple characterization and modeling of credit risk is then presented.

Date: 2022
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DOI: 10.1007/978-3-030-84600-8_5

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