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Topic: Credit risk

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In the News (Wed 23 Apr 14)

  Credit risk - Wikipedia, the free encyclopedia
Credit risk is the risk of loss due to a debtor's non-payment of a loan or other line of credit (either the principal or interest (coupon) or both).
A recent innovation to protect lenders and bond holders from the danger of default are credit derivatives, most commonly in the form of a credit default swap.
There may even be a credit risk department whose job is to assess the financial health of their customers, and extend credit (or not) accordingly.
en.wikipedia.org /wiki/Credit_risk   (566 words)

 Credit risk management - Wikipedia, the free encyclopedia
Credit risk management is the process of finding risk in an investment When the risk has been identified, investment decisions can be made and the risk vs. return balance considered from a better position.
The main way to reducing credit risk is by monitoring the behaviour of clients who wish apply for credit in the business.
Credit Risk is further divided into many areas in a somewhat hierarchical fashion.
en.wikipedia.org /wiki/Credit_risk_management   (185 words)

 Credit Risk
As it matures, the supply side of the credit risk cycle is increasingly driven by attempts to maximise the risk-adjusted rate of return on credit risk in each institution, while at the same time transferring away any life-threatening concentrations and correlations of credit risk.
Credit risk exposure measurement is especially important for lenders that extend lines of credit, as opposed to outright loans, and also to banks with portfolios of derivatives that have ever-changing and volatile credit exposures.
The first credit derivatives were traded in the early 1990s, but it is only in the last couple of years that their appeal has expanded from a few leading banks, dealing among themselves, to encompass broader sections of the financial markets and a wider range of uses.
www.erisk.com /Learning/JigSaw/CreditRisk.asp   (7251 words)

 Credit risk   (Site not responding. Last check: 2007-10-20)
Credit risk is a risk of non-payment by the borrower (issuer) ofa principal debt and interest due to the creditor (investor) on a date set by security issue conditions.
Credit risk is the probability of depreciation as part of the bank assets represented with an amount of outstanding loans and acquired liabilities, or probability of an actual yield from the given part of assets appearing much below the expected settlement level.
The major point in credit risk estimation is the construction of a transition matrix reflecting the probability of a borrower's transition from one credit rating category to another one, be it higher or lower, during a certain period.
www.finflowholdings.com /ffh/credit_risk.shtml   (1187 words)

 Credit Risk
When a bank’s credit committee (or similar body) comes to approve a credit line, it is essential that committee members have a thorough understanding of every aspect of the counterparty or borrower.
Some recent discussions have concluded that credit limits are insufficiently flexible and limit the scope of a bank’s traders, and that they should be replaced by sophisticated return on risk measures.
Credit risk monitoring and implementing a credit policy should not be the responsibility of the credit department alone.
www.financewise.com /public/edit/riskm/credit/cre-policy.htm   (2216 words)

 Credit Risk
Credit risk is risk due to uncertainty in a counterparty's (also called an obligor's or credit's) ability to meet its obligations.
The term encompasses credit scoring, but it is more frequently used to describe the use of asset value models and intensity models in several contexts.
With credit risk models starting to supplant traditional credit analysis, and regulators increasingly invoking agency credit ratings in their regulations, there is much controversy surrounding the use of credit ratings.
www.riskglossary.com /articles/credit_risk.htm   (1468 words)

Risk doesn't have the impression that either of those methods was the undisputed king of early warning systems, and each has its methodological weaknesses.
Risk could easily and truthfully answer, "The same measure of expected excess return over cost of funding will be just as valid in the 'reduced form' case as it was in the 'Full Monte' case." Unfortunately, that would be both true and misleading.
The DPC’s credit rating typically exceeds the parent’s, because the parent infuses it with a large amount of capital, compared to the credit exposure that that DPC counterparties have to it.
www.margrabe.com /CreditRisk.html   (9668 words)

 Risk magazine - Convergence on credit
Accordingly, credit risk managers at insurance companies are scrutinising Basel II on the assumption that many of the principles will eventually be applied to their industry.
Credit risk also arises on the asset side through insurance firms' investments in corporate and government bonds and structured credit.
As credit portfolio management practices have become part of the fabric of risk management at banks, those techniques have been encouraged at insurance companies that are part of large banking groups.
www.risk.net /public/showPage.html?page=332068   (1908 words)

 Credit Risk
When estimating credit risk, a complicating factor is that the Loss Given Default parameter often tends to rise at the same time that the Probability of Default risk factor rises.
The maximum risk a typical household faces during its life cycle is larger than it formerly was mainly because more households are now staying at or near their maximum risk position for a longer period.
Traditionally, credit risk researchers have treated the important recovery rate variable as a function of historic average default recovery rates, conditioned perhaps on seniority and collateral factors, and in almost all cases as independent of expected or actual default rates.
www.erisk.com /ResourceCenter/Credit/Listing.asp   (9881 words)

 Credit Risk
However, to price the credit derivative, not only is it necessary to be able to arrive at an expected value, it is also essential to have a value for the price of risk in the credit market.
After all, the main reason for most early credit derivatives was that portfolio managers were averse to the credit risk held in their portfolios.
Credit spreads: this method looks at the spread between the interest paid for company debt and that paid on government debt of the same maturity.
www.financewise.com /public/edit/riskm/credit/cre-deriv.htm   (2243 words)

 RiskMetrics Group - Managing Risk - Lesson: Credit risk
Credit risk is defined as potential loss due to change in credit quality or default of a counterparty.
Although credit risk is not as easily observable as market risk, it has perhaps become the greatest risk management challenge of the late 1990s as institutions globally are taking on an increasing amount of credit risk.
Furthermore, credit risk is sensitive to the economic cycle, with many firms defaulting together during a downturn.
www.riskmetrics.com /courses/identifying_risk/creditrisk.html   (378 words)

 Credit Risk - Banking Information, Federal Reserve Bank of Chicago   (Site not responding. Last check: 2007-10-20)
Credit risk arises from potential that a borrower or counter-party to a transaction will fail to perform on an obligation.
An assessment of credit risk is an integral part of the Federal Reserve's examination activities.
In addition, to mitigate concentration risks, institutions should monitor the mix of property types and performance of their portfolio as a whole and the performance of local CRE markets in which they are lending.
www.chicagofed.org /banking_information/credit_risk.cfm   (648 words)

 Credit risk transfer
One common approach is to ensure that the risk shedder retains some interest in the performance of the borrower and therefore some incentive to monitor the borrower’s performance carefully.
Increasingly, they are acting as credit originators rather than long-term funders, shifting loans off their balance sheet either individually or as part of a package through loan transfers and securitisation.
Risk management - although in many respects CRT involves familiar risk management issues, it does sharpen questions about counterparty risk in relation to unfunded risk transfers, given the speed and scale of possible changes in exposures, and also raises technical questions about the reliability of pricing of portfolio instruments.
www.bis.org /publ/cgfs20.htm   (1482 words)

 Credit Risk   (Site not responding. Last check: 2007-10-20)
Credit risk is the risk that a party will not settle an obligation for full value.
Financial institutions should have procedures in place to manage the credit risk of third parties using their accounts to settle transactions.
With the deferred settlement, there is a risk that the paying institution or some intermediate party will fail before inter-institution settlement occurs.
www.ffiec.gov /ffiecinfobase/booklets/Retail/retail_03c.html   (663 words)

 Amazon.com: Credit Risk: Books: Tomasz R. Bielecki,Marek Rutkowski   (Site not responding. Last check: 2007-10-20)
The main objective of Credit Risk: Modeling, Valuation and Hedging is to present a comprehensive survey of the past developments in the area of credit risk research, as well as to put forth the most recent advancements in this field.
An important aspect of this text is that it attempts to bridge the gap between the mathematical theory of credit risk and the financial practice, which serves as the motivation for the mathematical modeling studied in the book.
Mathematical developments are presented in a thorough manner and cover the structural (value-of-the-firm) and the reduced (intensity-based) approaches to credit risk modeling, applied both to single and to multiple defaults.
www.amazon.com /Credit-Risk-Tomasz-R-Bielecki/dp/3540675930   (1235 words)

 SAS | SAS Credit Risk Management
Accurately forecast, measure, monitor and report potential credit risk exposures across the entire organization, both on the counterparty level and portfolio level.
SAS Credit Risk Management enables you to quickly and accurately calculate critical risk measures, such as probability of default, exposure at default, credit migration, regulatory capital, risk weighted assets, credit value at risk (CVaR) and economic capital.
SAS Credit Risk Management, a component of the SAS Banking Intelligence Solutions, is based on the SAS Intelligence Platform — an open, flexible and extensible framework that leverages existing operational systems and applications.
www.sas.com /offices/europe/uk/solutions/riskmgmt/credit.html   (597 words)

 Credit Suisse - Institutional - Research - Client Applications - CreditRisk+
Data requirements are minimal: risk can be estimated by specifying a loss given default for each asset, together with estimated default probabilities and their volatilities.
Both portfolio level risk and approximate contributions to risk by asset are calculated.
Credit Suisse has developed a number of credit analytic models in addition to CreditRisk+, including CUSP and PortfolioRisk+.
www.csfb.com /institutional/research/credit_risk.shtml   (197 words)

 Credit magazine, corporate bonds, derivatives, structured credit, leveraged finance
Rising LBO risk is forcing bondholders to fight for more robust covenant language.
Credit looks at the obstacles in the market and the tools investors are using to overcome them.
With Europe’s first commercial real-estate CDO coming to market, Credit asks market participants for their opinions on the potential of this emerging asset class.
www.creditmag.com   (175 words)

 Amazon.com: Credit Risk Valuation: Books: Manuel Ammann   (Site not responding. Last check: 2007-10-20)
Additionally, the book includes new models for valuing derivative securities with credit risk, focussing on options and forward contracts subject to counterparty default risk, but also treating options on credit-risky bonds and credit derivatives.
Credit risk can be defined as the possibility that a contractual counterparty does not meet its obligations stated in the contract, thereby causing the creditor a financial loss.
That is really the focus, though it also has stuff on general credit risk and credit derivatives (I wish it had more on credit derivatives).
www.amazon.com /Credit-Risk-Valuation-Manuel-Ammann/dp/3540678050   (1369 words)

 Journal of Credit Risk
The forum will provide rapid communication of findings and ideas about credit risk that are timely, expository and educational, promoting active discussions of current issues in credit risk.
There are many interesting issues surrounding credit risk that are of both practical and academic interest.
This section is comprised of book reviews by leading credit risk practitioners and is designed to aid the reader in making an informed choice about potential book purchases.
www.journalofcreditrisk.com   (167 words)

 Articles on credit derivatives
A Tree Implementation of a Credit Spread Model for Credit Derivatives by Philipp J. Schönbucher of the Department of Statistics, Bonn University, Bonn University
Exploring for the Determinants of Credit Risk in Credit Default Swap Transaction Data by Didier Cossin of HEC, University of Lausanne, and Tomas Hricko of HEC
Credit derivatives aren't just for banks anymore, but the new instruments aren't without their own faults.
www.credit-deriv.com /creart.htm   (950 words)

 Credit Risk   (Site not responding. Last check: 2007-10-20)
But the marketplace is broader and more complex today and best-practice institutions know they need to measure and manage risk across the entire enterprise.
We recognize that managing Credit Risk is still essential to enterprise-wide risk management, so we offer products and services to institutions and individuals involved in retail, commercial, and corporate credit risk.
If you have comments or questions about the Credit Risk area of RMA, please contact Jim Nelson, Director of Credit Risk, RMA at jnelson@rmahq.org.
www.rmahq.org /RMA/CreditRisk   (239 words)

 Credit Risk Resource by Enrico De Giorgi
Here you can find references and useful sources on credit risk modeling, credit risk measurement for corporate debt, credit derivatives and retail credit portfolios.
The Credit Risk Webpage now offers a very useful and unique platform for discussion: The credit risk forum.
Credit risk models I: default correlation in intensity models
www.creditriskresource.com   (234 words)

 DefaultRisk.com The largest collections of credit risk modeling resource
This is the web's most comprehensive credit risk modeling and measurement resource for corporate debt.
I have been excited by credit risk methodologies throughout my career (I work at Fitch Ratings with a crack quant team).
Although I am the principal author of CreditMetrics® and LossCalc™ (and have a natural affinity for them), I am more of an advocate for the continued study of credit risk modeling.
www.defaultrisk.com   (833 words)

 Credit derivatives -risk of the banking system and financial stability
Several studies and articles have gone into the risks of credit derivatives - risks to the stability of the financial system, transparency, banking regulation, etc.
A Financial Policy Forum article on the fallout of GM and Ford downgrade on the credit derivatives market and hedge fund meltdown - click here.
OECD document on credit risk transfer through credit derivatives and risk issues: July 2002 - click here.
www.credit-deriv.com /finacial_risk.htm   (337 words)

 Credit risk
all direct and contingent credit limits to a given counterparty globally- and a Uniform Credit Rating system (UCR), the risk rating of the obligor; such approval authorities also depend upon acceptable risk monitoring, reporting and control being maintained;
Through the credit process, UCR ratings are assigned to all counterparties and must be duly approved later by the appropriate authority level.
To enhance its credit portfolio management capabilities, ABN AMRO has internally developed a multi-factor RAROC model.
www.abnamro.com /annualreports/2001/index3_html_folder_115.htm   (350 words)

 CREDIT RISK - www.credit-risk.org - online credit risk library   (Site not responding. Last check: 2007-10-20)
CREDIT RISK - www.credit-risk.org - online credit risk library
more than 400 credit risk papers are now fully downloadable !
Use our efficient search engine to find their details and contact them to share ideas...Register yourself in few seconds.
www.credit-risk.org   (83 words)

 Risk magazine | risk management, derivatives, structured products
Dealers are trading increasingly high volumes of bespoke tranches of synthetic credit risk with each other
Deutsche Bank has maintained its lead in this year’s Risk interdealer survey, coming top for the second successive year.
Structured credit experts devote much of their creative energy to developing different...
www.risk.net   (146 words)

 Credit Risk
This is one of the measurements of the likelihood that a party will default on a financial agreement.
- For investors considering buying debt securities, a credit rating is an essential tool.
Why do commercial bills have higher yields than T-bills?
www.investopedia.com /terms/c/creditrisk.asp   (182 words)

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