An Introduction to Credit Risk and Asset Pricing

Into the Thesis, the author will try to give the basis of risk management and asset pricing. Both of them are fundamental elements to understand how the financial models work; this topic is judged important in the perspective of successive studies in financial math: having clear the starting point makes things easier. From the title it is clear that modern and more complex models will be only touched upon. We decide to divide the dissertation in two different parts because, in our opinion, it is more evident that two different ways to approach at credit risk exist: on one side we try to quantify the risk deriving from giving credit, on the other we will establish a strategy that allows us to invest money with the aim to pay the other part of the agreement. Everything became more clear chapter by chapter. Financial institutions like banks are exposed at both of this type of risk. Chapters 1 and 5 are the center of this thesis: they represent the zero point from which the modern models were originated.