impairment due to credit risk

... mechanism In general, there are following risks: interest risk, capital risk, exchange risk, payment risk, and risk of unable to pay - Interest risks: “are the risks that the bank must bear when the ... Chapter 1: Overview of risk, significance of precluding and reducing risk in credit relationships 1.1 Risk and risk classification in credit relationships 1.1.1 Definition of risk Risks are problems ... examined to solve the problem and to infer lessons 1.2 Expressions and criteria to determine credit risks 1.2.1 Expressions Qualitative expressions of credit risks: + The economy is receded + Customers...

Ngày tải lên: 27/10/2012, 16:49

... be available to both rated and unrated bank claims, but not to banks risk weighted at 150% Credit Assessment of Banks AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- Below B- Unrated Risk weights ... where the risk weight will be capped at 150% Credit Assessment of Sovereign AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- Below B- Unrated Sovereign risk weights 0% 20% 50% 100% 150% 100% Risk weights ... may decide to attach the risk weights applicable to corporates (iii) Risk weights for multilateral development banks (MDBs) 22 The risk weights applied to MDBs will be based on external credit assessments...

Ngày tải lên: 29/03/2014, 06:21

... charged to the customer, hereby taking the creditworthiness captured by the customer’s rating into account More risky customers have to pay a higher risk premium than customers showing high credit ... Factors Systematic Risk Industry Risk Industry-Specific Risk Specific Risk Country Risk Country-Specific Risk Global Economic, Regional, and Industrial Sector Risk FIGURE 1.7 Three-level factor ... LLC 2.5 2.6 2.7 One-Factor/Sector Models 2.5.1 The CreditMetricsTM /KMV One-Factor Model 2.5.2 The CreditRisk+ One-Sector Model 2.5.3 Comparison of One-Factor and One-Sector Models Loss Distributions...

Ngày tải lên: 28/06/2014, 22:20

... Factors Systematic Risk Industry Risk Industry-Specific Risk Specific Risk Country Risk Country-Specific Risk Global Economic, Regional, and Industrial Sector Risk FIGURE 1.7 Three-level factor ... to the philosophy of its authors Gupton, Finger, and Bhatia to make credit risk methodology available to a broad audience in a fully transparent manner Both companies continue to contribute to ... Correlation ModelTM The factor model of CreditMetricsTM is quite similar to KMV’s factor model just described So there is no need to start all over again, and we refer to the CreditMetricsTM Technical...

Ngày tải lên: 10/08/2014, 07:20

... Process Macroeconomic Factors Definition of Risk Distance to Default (DtD) Mark -to- Model Mark -to- Model of Loan Value of Loan Value Default Risk only Default Risk only Risk Scale DtD on contin ... order to study the impact of certain changes of industry or country indices on the default probability of some obligor 2.4.2 CreditRisk+ CreditRisk+ is a credit risk model developed by Credit ... presentation of CreditMetricsTM , the KMV-Model, and the actuarian model CreditRisk+ The reason for not going too much into details is that CPV can be considered as a general framework for credit risk...

Ngày tải lên: 10/08/2014, 07:20

... more generally latent variable) models 2.5.2 The CreditRisk+ One-Sector Model We already discussed CreditRisk+ in Section 2.4.2 and will come back to it in Chapter Therefore this paragraph is just ... Historic Corporate Bond Default Frequencies from 1970 to 2000 ©2003 CRC Press LLC TABLE 2.8: Calibration Results due to Regression I ©2003 CRC Press LLC TABLE 2.9: Calibration Results due to ... distributions of CreditMetricsTM respectively KMV with the corresponding distribution in the CreditRisk+ world Assuming infinitely many obligors and only one sector, we obtain a situation comparable to the...

Ngày tải lên: 10/08/2014, 07:20

... short selling of A today, giving us A0 units of money today; buying asset B today, hereby spending B0 units of money; investing the residual A0 − B0 > in the riskless bond today At time T , we ... just-mentioned interest payment compensating for the credit risk associated with the credit deal From the point of view of debt holders, credit risk arises if and only if P[AT < F ] > , meaning ... holders (e.g., a lending bank) is the attempt to neutralize the credit risk by purchasing some kind of credit protection In our case a successful strategy is to buy a suitable derivative For this purpose,...

Ngày tải lên: 10/08/2014, 07:20

... into the details of the CreditRisk+ model, we like to present a quotation from the CreditRisk+ Technical Document [18] on page There we find that CreditRisk+ focuses on modeling and managing credit ... implemented so that everyone is free to program his or her “individual” version of CreditRisk+ There is much more to say about CreditRisk+ , but due to the introductory character of this book we will ... appropriate choice if one is interested in a mark -to- market model of credit risk 4.1 The Modeling Framework of CreditRisk+ Crucial in CreditRisk+ is the use of probability-generating functions1...

Ngày tải lên: 10/08/2014, 07:20

... the investor is to pay should exactly off set the expected loss due to a possible default Instead, it is natural to assume that investors ©2003 CRC Press LLC are concerned about default risk and ... then to a rating class, i.e., firms with default rates less than or equal to 0.002% are mapped to AAA, 0.002% to 0.04% corresponds to AA, etc The historical frequencies of changes from one range to ... drawn from bond or credit default swap spreads The difference between actual and risk- neutral probabilities reflects risk- premiums required by market participants to take risks To illustrate this...

Ngày tải lên: 10/08/2014, 07:20

... the bonds have to be from the same credit quality) with different maturities and a given recovery rate one now has to back out the credit curve To this end we have to specify also a riskless discount ... introduction to the different types of credit derivatives and their use for risk management see [68,107]; for documentation and guidelines we refer to [61] 7.1 Total Return Swaps A total return ... investor can not be exposed to Latin America market for various reasons, he or she is able to so by doing a total return swap with a counterparty that has easy access to this market Investors...

Ngày tải lên: 10/08/2014, 07:20

... has access to this particular credit exposure offers a way to evade the problems hindering the investor to purchase the exposure he is interested in The issuer sells a note to the investor with ... interest, including some premium for the default risk, to the investor In case the reference asset experiences a credit event, the issuer pays to the investor the recovery proceeds of the reference ... the investor’s exposure at risk In case no credit ©2003 CRC Press LLC Interest / Premium Issuer • Bank • SPV • etc Seller of Risk Proceeds Notes Investor • Bank • Insurance • etc Buyer of Risk Premium...

Ngày tải lên: 10/08/2014, 07:20

... Process Macroeconomic Factors Definition of Risk Distance to Default (DtD) Mark -to- Model Mark -to- Model of Loan Value of Loan Value Default Risk only Default Risk only Risk Scale DtD on contin ... order to study the impact of certain changes of industry or country indices on the default probability of some obligor 2.4.2 CreditRisk+ CreditRisk+ is a credit risk model developed by Credit ... presentation of CreditMetricsTM , the KMV-Model, and the actuarian model CreditRisk+ The reason for not going too much into details is that CPV can be considered as a general framework for credit risk...

Ngày tải lên: 10/08/2014, 07:21

... short selling of A today, giving us A0 units of money today; buying asset B today, hereby spending B0 units of money; investing the residual A0 − B0 > in the riskless bond today At time T , we ... just-mentioned interest payment compensating for the credit risk associated with the credit deal From the point of view of debt holders, credit risk arises if and only if P[AT < F ] > , meaning ... holders (e.g., a lending bank) is the attempt to neutralize the credit risk by purchasing some kind of credit protection In our case a successful strategy is to buy a suitable derivative For this purpose,...

Ngày tải lên: 10/08/2014, 07:21

... the investor is to pay should exactly off set the expected loss due to a possible default Instead, it is natural to assume that investors ©2003 CRC Press LLC are concerned about default risk and ... then to a rating class, i.e., firms with default rates less than or equal to 0.002% are mapped to AAA, 0.002% to 0.04% corresponds to AA, etc The historical frequencies of changes from one range to ... drawn from bond or credit default swap spreads The difference between actual and risk- neutral probabilities reflects risk- premiums required by market participants to take risks To illustrate this...

Ngày tải lên: 10/08/2014, 07:21

... the bonds have to be from the same credit quality) with different maturities and a given recovery rate one now has to back out the credit curve To this end we have to specify also a riskless discount ... introduction to the different types of credit derivatives and their use for risk management see [68,107]; for documentation and guidelines we refer to [61] 7.1 Total Return Swaps A total return ... investor can not be exposed to Latin America market for various reasons, he or she is able to so by doing a total return swap with a counterparty that has easy access to this market Investors...

Ngày tải lên: 10/08/2014, 07:21

... has access to this particular credit exposure offers a way to evade the problems hindering the investor to purchase the exposure he is interested in The issuer sells a note to the investor with ... interest, including some premium for the default risk, to the investor In case the reference asset experiences a credit event, the issuer pays to the investor the recovery proceeds of the reference ... the investor’s exposure at risk In case no credit ©2003 CRC Press LLC Interest / Premium Issuer • Bank • SPV • etc Seller of Risk Proceeds Notes Investor • Bank • Insurance • etc Buyer of Risk Premium...

Ngày tải lên: 10/08/2014, 07:21

... notes is quite low, in part due to the amortization structure of the collateral pool, but to some extent also due to broken ©2003 CRC Press LLC coverage tests leading to a deleveraging of the outstandings ... Econometrica, 53:385–407, 1985 [18] Credit Suisse Financial Products CreditRisk+ – A Credit Risk Management Framework, 1997 [19] P Crosbie Modeling default risk KMV Corporation, http: //www.kmv.com, ... copulas http://gro.creditlyonnais.fr, 1996 [51] M B Gordy A comparative anatomy of credit risk models Journal of Banking and Finance, 24:119–149, 2000 [52] M B Gordy A risk- factor model foundation...

Ngày tải lên: 10/08/2014, 07:21

... bank to bank That is: DVA = fair value (reflecting all counterparty credit risk) – hypothetical fair value ignoring own credit risk Derecognition of derivatives valuation adjustments due to own credit ... changes due to the bank’s own creditworthiness (c) Adjustment based on liquidation claim and balance sheet value Derecognition of derivatives valuation adjustments due to own credit- risk Application ... be to derecognise gains and losses due to changes in the bank’s own creditworthiness, but recognise all other effects related to DVA Derecognition of derivatives valuation adjustments due to...

Ngày tải lên: 15/02/2014, 13:20

... liquidity risk on top of market and credit risk Just as I was struggling to integrate these three types of risk, people started worrying about operational risk, basis risk, mortality risk, weather risk, ... manageable risks on to other traders Traders may tend to underestimate the degree to which their profitability is due to customer deal flow and overestimate the degree to which it is due to anticipating ... estimation risk, counterparty credit risk, and even the risk that your models for all these risks were wrong If model risk existed, then you had to concede that even your model for model risk was risky...

Ngày tải lên: 03/04/2014, 18:47