Credit Risk Measurement 2e / Edition 2

Credit Risk Measurement 2e / Edition 2

by Anthony Saunders, Linda Allen
     
 

Credit Risk Measurement

On December 2, 2001, Enron Corporation filed for Chapter 11 bankruptcy protection. At an asset value of $49.53 billion, this was the largest bankruptcy filing in U.S. history to date. At the time, many of the world's most prominent financial institutions had billions of dollars of credit risk exposure to Enron. Adoption of early warning

See more details below

Overview

Credit Risk Measurement

On December 2, 2001, Enron Corporation filed for Chapter 11 bankruptcy protection. At an asset value of $49.53 billion, this was the largest bankruptcy filing in U.S. history to date. At the time, many of the world's most prominent financial institutions had billions of dollars of credit risk exposure to Enron. Adoption of early warning systems that accurately measure credit risk exposure might have alerted these investors in time for them to take action to manage their risk exposure. That is the role of the credit measurement models surveyed in this book. Indeed, you can see at a glance that several of these models-KMV's EDF score and Altman's Z-Score-predicted significant increases in Enron's credit risk exposure long before the bankruptcy filing.

A recent revolution has been brewing in risk measurement and risk management. In the past two years, the art of credit risk measurement has progressed far beyond anyone's expectations-many models are already entering their second generation. Contrary to its relatively dull and routine history, this new generation of credit risk modeling has seen the emergence of new technologies and ideas. The search by the Bank for International Settlements (BIS) to design a new set of international bank capital regulations, scheduled for adoption in 2005, hinges on details of model structure and data availability. Much of this highly technical debate has been inaccessible to the interested practitioner, student, economist, or regulator-until now.

In the fully updated Credit Risk Measurement: New Approaches to Value at Risk and Other Paradigms, Second Edition, Anthony Saunders and Linda Allen discuss all of the latest credit risk measurement and modeling techniques. Simplifying many of the technical and analytical details surrounding these models, Saunders and Allen concentrate on the underlying economics and their level of economic intuition to objectively evaluate the new models. Saunders and Allen examine how these new models approach the evaluation of individual borrower and portfolio credit risk exposure, as well as the development of derivative contracts to manage credit risk exposure.

The alternative models include (among others):
* Loans as options: the KMV and Moody's models
* Intensity-based models: KPMG's Loan Analysis System and Kamakura's Risk Manager
* VAR models, including stress testing: CreditMetrics and Algorithmics' Mark-to-Future
* The insurance approach: mortality models and CSFP Credit Risk Plus
* RAROC models
* The BIS proposals for the New Basel Capital Accord updated to 2002

The art and science of credit risk management is the single most important topic in finance today-from the 2002 BIS proposals to cutting-edge risk measurement models known as intensity-based models. To get a jump on these new concepts and tools, you need the best guidance available. With its comprehensive coverage, summary, and comparison of new approaches, Credit Risk Measurement, Second Edition gives you the best opportunity to do so. With clear explanations of often complex material, Credit Risk Measurement, Second Edition is an indispensable resource for bankers, academics and students, economists, and regulators.

Read More

Product Details

ISBN-13:
9780471219101
Publisher:
Wiley
Publication date:
03/15/2002
Series:
Wiley Finance Series, #117
Edition description:
REV
Pages:
336
Product dimensions:
0.81(w) x 9.21(h) x 6.14(d)

Table of Contents

List of Abbreviations.

Why New Approaches to Credit Risk Measurement and Management?

Traditional Approaches to Credit Risk Measurement.

The BIS Basel International Bank Capital Accord: January 2002.

Loans as Options: The KMV and Moody's Models.

Reduced Form Models: KPMG's Loan Analysis System and Kamakura's Risk Manager.

The VAR Approach: CreditMetrics and Other Models.

The Macro Simulation Approach: The CreditPortfolio View and Other Models.

The Insurance Approach: Mortality Models and the CSFP Credit Risk Plus Model.

A Summary and Comparison of New Internal Model Approaches.

Overview of Modern Portfolio Theory and Its Application to Loan Portfolios.

Loan Portfolio Selection and Risk Management.

Stress Testing Credit Risk Models: Algorithmics Mark-to-Future.

Risk-Adjusted Return on Capital Models.

Off-Balance-Sheet Credit Risk.

Credit Derivatives.

Bibliography.

Notes.

Index.

Customer Reviews

Average Review:

Write a Review

and post it to your social network

     

Most Helpful Customer Reviews

See all customer reviews >