Credit Risk Measurement 2e / Edition 2

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Praise for Credit Risk Measurement
New Approaches to Value at Risk and Other Paradigms
Second Edition

"Saunders and Allen provide practitioners a comprehensive picture of the tools available for the notoriously difficult task of quantifying credit risk. Without neglecting the underlying theory, they zero in on the actual technologies being employed, offering unbiased views of their comparative strengths and limitations."
-Martin Fridson, Chief High Yield Strategist, Merrill Lynch & Co.

"Nowhere else can be found such a clear and rigorous presentation of the newest models, both original and second-generation, for analyzing stand-alone and portfolio credit asset risk models. This is a must read for any practitioner or scholar interested in applying or testing the latest entries in the credit risk modeling challenge or for attempting to build and test new approaches."
-Edward I. Altman, Max L. Heine Professor of Finance, NYU Stern School of Business

"A great introduction to the issues and concepts of credit risk management. The first edition offered a remarkably clear, 'big picture' perspective. This edition expands and updates the topics covered."
-Mark Flannery, BankAmerica Eminent Scholar in Finance, University of Florida

"Measuring credit risk accurately has become increasingly important as economies almost worldwide have slowed with an accompanying increase in defaults and default losses. At the same time, the widespread controversies surrounding the proposed changes in the Basel risk weights for bank credit risk exposures have highlighted the complexity of such computations. The second edition of this book makes a timely contribution in describing both the theory underlying credit risk measurement and the alternative approaches for estimating risk exposures empirically. The book should be read by bankers and credit analysts, as well as by bank supervisors and policymakers involved in bank risk regulation."
-George Kaufman, John F. Smith Jr. Professor of Finance and Economics
Loyola University Chicago

"Since the welcome appearance of the first edition of Credit Risk Measurement in 1999, readers from academia as well as the workaday world of finance have benefited from its sweeping overview of the topic and detailed 'how-to' analysis. It is thus reassuring that bankers, insurers, professors, and students alike can again rely on Professors Saunders and Allen for their cogent update of this survival manual. It is now, more than ever, a 'must read.'"
-Manuel Sebastiao, Member of the Board, Bank of Portugal

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Editorial Reviews

Saunders (finance, Stern School of Business, New York U.) and Allen (finance, Zicklin School of Business at Baruch College, City U. of New York) examine models for credit risk estimation. Models applicable to both individual borrower and portfolio risk assessment are covered. Introductory chapters explore the advancement of the field since the previous edition two years earlier, traditional approaches, and explain the Basel International Capital Accord of 2002 which seeks to develop a single capital requirement for credit risk across the major banking countries. Remaining chapters focus solely on models. Annotation c. Book News, Inc., Portland, OR (
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Product Details

  • ISBN-13: 9780471219101
  • Publisher: Wiley, John & Sons, Incorporated
  • Publication date: 3/15/2002
  • Series: Wiley Finance Series, #117
  • Edition description: REV
  • Edition number: 2
  • Pages: 336
  • Product dimensions: 0.81 (w) x 9.21 (h) x 6.14 (d)

Meet the Author

ANTHONY SAUNDERS is John M. Schiff Professor of Finance and Chair of the Department of Finance at the Stern School of Business at New York University. He holds positions on the Board of Academic Consultants of the Federal Reserve Board of Governors and the Council of Research Advisors for the Federal National Mortgage Association. He is an editor of the Journal of Banking and Finance and Financial Markets, Instruments, and Institutions.
LINDA ALLEN is Professor of Finance at the Zicklin School of Business at Baruch College, CUNY, and Adjunct Professor of Finance at the Stern School of Business at New York University. She is also the author of Capital Markets and Institutions: A Global View (Wiley). She is an associate editor of the Journal of Banking and Finance, Journal of Economics and Business, Multinational Finance Journal, Journal of Multinational Financial Management, and The Financier.
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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.




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