The Handbook of Credit Risk Management: Originating, by Sylvain Bouteille

By Sylvain Bouteille

A accomplished consultant to credits chance management The guide of credits probability administration provides a finished evaluate of the perform of credits possibility administration for a wide establishment. it's a advisor for execs and scholars in need of a deeper realizing of ways to control credits exposures. The guide presents an in depth roadmap for dealing with past the monetary research of person transactions and counterparties. Written in a simple and available type, the authors define tips to deal with a portfolio of credits exposures--from origination and evaluate of credits basics to hedging and pricing. The guide is suitable for companies, pension money, endowments, asset managers, banks and insurance firms alike.Covers the 4 crucial elements of credits chance administration: Origination, credits chance evaluate, Portfolio administration and hazard Transfer.Provides abundant references to and examples of credits marketplace providers as a source for these readers having credits possibility responsibilities.Designed for busy execs in addition to finance, probability administration and MBA students.As monetary transactions develop extra advanced, proactive administration of credits portfolios isn't any longer non-compulsory for an establishment, yet a question of survival.

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If the borrower cannot repay or give back the securities, the lender can sell the collateral, thus reducing or eliminating losses. In theory, the collateral held is sufficient to cover the amount of borrowed money or the value of the securities in case the counterparty defaults. When the financial markets are volatile, though, the value of the collateral can decline quickly, just at the time when the counterparty defaults. Banks, therefore, manage their exposures carefully. We introduce repos in more detail in Chapter 13.

Third, it can be used to speculate on the demise of an entity. We terminate by providing an overview of the limitations of credit derivatives as a hedging instrument and by presenting products based on credit derivatives exchanged in the market-place. Collateralized debt obligations or CDOs have sometimes been blamed for the role they played in the 2007 crisis. In Chapter 17 (“Collateral Debt Obligations”), we introduce the basic concept of CDOs, explaining that they are a form a securitization already detailed in Chapter 8.

DOES THE SELLER KEEP AN INTEREST IN THE DEAL? ARE THE PROPER MITIGANTS IN PLACE? IS THE LEGAL DOCUMENTATION SATISFACTORY? IS THE DEAL PRICED ADEQUATELY? DO I HAVE THE SKILLS TO MONITOR THE EXPOSURE? IS THERE AN EXIT STRATEGY? FINAL WORDS Part Two: Credit Assessment Chapter 4: Measurement of Credit Risk EXPOSURE DEFAULT PROBABILITY THE RECOVERY RATE THE TENOR DIRECT VERSUS CONTINGENT EXPOSURE THE EXPECTED LOSS Chapter 5: Dynamic Credit Exposure LONG-TERM SUPPLY AGREEMENTS DERIVATIVE PRODUCTS THE ECONOMIC VALUE OF A CONTRACT MARK-TO-MARKET VALUATION VALUE AT RISK (VaR) Chapter 6: Fundamental Credit Analysis ACCOUNTING BASICS A TYPICAL CREDIT REPORT AGENCY CONFLICT, INCENTIVES, AND MERTON'S VIEW OF DEFAULT RISK FINAL WORDS Chapter 7: Alternative Estimations of Credit Quality THE EVOLUTION OF AN INDICATOR: MOODY'S ANALYTICS EDF™ CREDIT DEFAULT SWAP PRICES BOND PRICES FINAL WORDS Chapter 8: Securitization ASSET SECURITIZATION OVERVIEW THE COLLATERAL THE ISSUER THE SECURITIES MAIN FAMILIES OF ABSs SECURITIZATION FOR RISK TRANSFER CREDIT RISK ASSESSMENT OF ABSs WAREHOUSING RISK FINAL WORDS Part Three: Portfolio Management Chapter 9: Credit Portfolio Management LEVEL 1 LEVEL 2 LEVEL 3 ORGANIZATIONAL SET-UP AND STAFFING THE IACPM FINAL WORDS Chapter 10: Economic Capital and Credit Value at Risk (CVaR) CAPITAL: ECONOMIC, REGULATORY, SHAREHOLDER DEFINING LOSSES: DEFAULT VERSUS MARK TO MARKET CREDIT VALUE AT RISK OR CVaR CREATING THE LOSS DISTRIBUTION ACTIVE PORTFOLIO MANAGEMENT AND CVaR PRICING FINAL WORDS Chapter 11: Regulation DOING BUSINESS WITH A REGULATED ENTITY DOING BUSINESS AS A REGULATED ENTITY HOW REGULATION MATTERS: KEY REGULATION DIRECTIVES FINAL WORDS Chapter 12: Accounting Implications of Credit Risk LOAN IMPAIRMENT LOAN-LOSS ACCOUNTING REGULATORY REQUIREMENTS FOR LOAN-LOSS RESERVES IMPAIRMENT OF DEBT SECURITIES DE-RECOGNITION OF ASSETS CONSOLIDATION OF VARIABLE INTEREST ENTITIES (VIEs) ACCOUNTING FOR NETTING HEDGE ACCOUNTING CREDIT VALUATION ADJUSTMENTS, DEBIT VALUATION ADJUSTMENTS, AND OWN CREDIT RISK ADJUSTMENT IFRS 7 FINAL WORDS Part Four: Mitigation and Transfer Chapter 13: Mitigating Derivative Counterparty Credit Risk MEASUREMENT OF COUNTERPARTY CREDIT RISK MITIGATION OF COUNTERPARTY CREDIT RISK THROUGH COLLATERALIZATION LEGAL DOCUMENTATION DEALERS VERSUS END-USERS BILATERAL TRANSACTIONS VERSUS CENTRAL COUNTERPARTY CLEARING PRIME BROKERS REPURCHASE AGREEMENTS FINAL WORDS Chapter 14: Structural Mitigation TRANSACTIONS WITH CORPORATES TRANSACTIONS WITH SPECIAL PURPOSE VEHICLES Chapter 15: Credit Insurance, Surety Bonds, and Letters of Credit CREDIT INSURANCE SURETY BONDS LETTERS OF CREDIT OR LoCs THE PROVIDERS' POINT OF VIEW FINAL WORDS Chapter 16: Credit Derivatives THE PRODUCT THE SETTLEMENT PROCESS VALUATION AND ACCOUNTING TREATMENT USES OF CDSs CREDIT DEFAULT SWAPS FOR CREDIT AND PRICE DISCOVERY CREDIT DEFAULT SWAPS AND INSURANCE INDEXES, LOAN CDSS, MCDSS, AND ABS CDSs Chapter 17: Collateral Debt Obligations (CDOs) WHAT ARE CDOs?

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