We discuss the valuation of credit derivatives in extreme regimes such as when the time-to-maturity is short, or when payoff is contingent upon a large number of defaults, as with senior tranches of collateralized debt obligations. In these cases, risk aversion may play an important role,...

Cover -- MULTISCALE STOCHASTIC VOLATILITY FOR EQUITY, INTEREST RATE, AND CREDIT DERIVATIVES -- Title -- Copyright -- To our families and students -- Contents -- Introduction -- 1 The Black-Scholes Theory of Derivative Pricing -- 1.1 Market Model -- 1.2 Derivative Contracts -- 1.3 Replicating...