Advanced Credit Risk Analysis and Management 1st Edition by Ciby Joseph 1118604911 9781118604915

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Product details:

• ISBN 10:1118604911

• ISBN 13:9781118604915

• Author:Ciby Joseph

Credit is essential in the modern world and creates wealth, provided it is used wisely. The Global Credit Crisis during 2008/2009 has shown that sound understanding of underlying credit risk is crucial. If credit freezes, almost every activity in the economy is affected. The best way to utilize credit and get results is to understand credit risk.

Advanced Credit Risk Analysis and Management helps the reader to understand the various nuances of credit risk. It discusses various techniques to measure, analyze and manage credit risk for both lenders and borrowers. The book begins by defining what credit is and its advantages and disadvantages, the causes of credit risk, a brief historical overview of credit risk analysis and the strategic importance of credit risk in institutions that rely on claims or debtors. The book then details various techniques to study the entity level credit risks, including portfolio level credit risks.

Authored by a credit expert with two decades of experience in corporate finance and corporate credit risk, the book discusses the macroeconomic, industry and financial analysis for the study of credit risk. It covers credit risk grading and explains concepts including PD, EAD and LGD. It also highlights the distinction with equity risks and touches on credit risk pricing and the importance of credit risk in Basel Accords I, II and III. The two most common credit risks, project finance credit risk and working capital credit risk, are covered in detail with illustrations. The role of diversification and credit derivatives in credit portfolio management is considered. It also reflects on how the credit crisis develops in an economy by referring to the bubble formation. The book links with the 2008/2009 credit crisis and carries out an interesting discussion on how the credit crisis may have been avoided by following the fundamentals or principles of credit risk analysis and management.

The book is essential for both lenders and borrowers. Containing case studies adapted from real life examples and exercises, this important text is practical, topical and challenging. It is useful for a wide spectrum of academics and practitioners in credit risk and anyone interested in commercial and corporate credit and related products.

Advanced Credit Risk Analysis and Management 1st Table of contents:

Part I: Introduction
Chapter 1: Credit Basics
1.1 MEANING OF CREDIT
1.2 ROLE OF CREDIT
1.3 CREDIT MARKET
1.4 CREDIT – ADVANTAGES AND DISADVANTAGES
1.5 SUPPLIERS OF CREDIT
1.6 CREDIT RISK STUDY
APPENDIX: CREDIT CREATION
QUESTIONS/EXERCISES
Chapter 2: Essentials of Credit Risk Analysis
2.1 MEANING OF CREDIT RISK
2.2 CAUSES OF CREDIT RISK
2.3 CREDIT RISK AND RETURN
2.4 CREDIT RISK ANALYSIS
2.5 HISTORICAL PROGRESS OF CREDIT RISK ANALYSIS
2.6 NEED FOR CREDIT RISK ANALYSIS
2.7 CHALLENGES OF CREDIT RISK ANALYSIS
2.8 ELEMENTS OF CREDIT RISK ANALYSIS
QUESTIONS/EXERCISES
Chapter 3: Credit Risk Management
3.1 STRATEGIC POSITION OF CREDIT RISK MANAGEMENT
3.2 CREDIT RISK MANAGEMENT CONTEXT
3.3 CREDIT RISK MANAGEMENT OBJECTIVES
3.4 CREDIT RISK MANAGEMENT STRUCTURE
3.5 CREDIT RISK CULTURE
3.6 CREDIT RISK APPETITE
3.7 CREDIT RISK MANAGEMENT IN NON-FINANCIAL FIRMS
3.8 CREDIT RISK MANAGEMENT IN FINANCIAL INTERMEDIARIES
QUESTIONS/EXERCISES
Part II: Firm (or) Obligor Credit Risk
Chapter 4: Fundamental Firm/Obligor-Level Risks
4.1 FIRM (OR) OBLIGOR RISK CLASSIFICATION
4.2 RISK MATRIX
4.3 DIFFERENT RISK LEVELS
QUESTIONS/EXERCISES
Chapter 5: External Risks
5.1 BUSINESS CYCLE
5.2 ECONOMIC CONDITIONS
5.3 INFLATION AND DEFLATION
5.4 BALANCE OF PAYMENTS AND EXCHANGE RATES
5.5 POLITICAL
5.6 FISCAL POLICY
5.7 MONETARY POLICY
5.8 DEMOGRAPHIC FACTORS
5.9 REGULATORY FRAMEWORK
5.10 TECHNOLOGY
5.11 ENVIRONMENT ISSUES
5.12 INTERNATIONAL DEVELOPMENTS
5.13 OTHERS
5.14 MONITORING EXTERNAL RISKS
QUESTIONS/EXERCISES
Chapter 6: Industry Risks
6.1 UNDERSTANDING OBLIGOR’S INDUSTRY OR MARKET
6.2 TYPES OF INDUSTRY RISKS
6.3 INDUSTRY LIFE CYCLE
6.4 PERMANENCE OF INDUSTRY
6.5 GOVERNMENT SUPPORT
6.6 INDUSTRY AND FACTORS OF PRODUCTION
6.7 INDUSTRY AND BUSINESS CYCLES
6.8 INDUSTRY PROFITABILITY
6.9 COMPETITOR/PEER GROUP ANALYSIS
QUESTIONS/EXERCISES
Chapter 7: Entity-Level Risks
7.1 UNDERSTANDING THE ACTIVITY
7.2 RISK CONTEXT AND MANAGEMENT
7.3 INTERNAL RISK IDENTIFICATION STEPS
7.4 SWOT ANALYSIS
7.5 BUSINESS STRATEGY ANALYSIS
7.6 PITFALLS IN STRATEGY
7.7 MANAGEMENT ANALYSIS
7.8 OTHER INTERNAL RISKS
QUESTIONS/EXERCISES
Chapter 8: Financial Risks
8.1 IMPORTANCE OF FINANCIAL STATEMENTS
8.2 QUALITY AND QUANTITY OF FINANCIAL STATEMENTS
8.3 ROLE OF HISTORICAL FINANCIAL STATEMENTS
8.4 FINANCIAL ANALYSIS
8.5 ANALYTICAL TOOLS
8.6 SOLVENCY RATIOS
8.7 OPERATIONAL RATIOS
8.8 ENCAPSULATED RATIOS
QUESTIONS/EXERCISES
Chapter 9: Integrated View of Firm-Level Risks
9.1 RELEVANCE OF AN INTEGRATED VIEW
9.2 JUDGEMENT
9.3 IDENTIFYING SIGNIFICANT CREDIT RISKS
9.4 RISK MITIGANTS
9.5 TYPES OF MITIGANTS
9.6 PRINCIPLES TO BE BORNE IN MIND WHILE SELECTING MITIGANTS
9.7 MONITORING OF CREDIT RISK
APPENDIX – CREDIT RISKS AND POSSIBLE MITIGANTS
QUESTIONS/EXERCISES
Chapter 10: Credit Rating and Probability of Default
10.1 CREDIT RISK GRADING
10.2 PROBABILITY OF DEFAULT
10.3 EXTERNAL VS. INTERNAL RATING
10.4 PD IN CREDIT STRUCTURAL MODELS
QUESTIONS/EXERCISES
Part III: Credit Risks – Project and Working Capital
Chapter 11: Credit Risks in Project Finance
11.1 DISTINCTIVE FEATURES OF PROJECT FINANCE
11.2 TYPES OF PROJECT FINANCE
11.3 REASONS FOR PROJECT FINANCE
11.4 PARTIES INVOLVED IN PROJECT FINANCE
11.5 PHASES OF PROJECT AND RISKS
11.6 PROJECT CREDIT RISKS
11.7 FINANCIAL STUDY
11.8 PROJECT CREDIT RISK MITIGANTS
QUESTIONS/EXERCISES
Chapter 12: Credit Risks in Working Capital
12.1 DEFINITION OF WORKING CAPITAL
12.2 ASSESSING WORKING CAPITAL THROUGH THE BALANCE SHEET
12.3 WORKING CAPITAL RATIOS
12.4 WORKING CAPITAL CYCLE
12.5 WORKING CAPITAL VS. FIXED CAPITAL
12.6 WORKING CAPITAL BEHAVIOUR
12.7 WORKING CAPITAL, PROFITABILITY AND CASH FLOWS
12.8 WORKING CAPITAL RISKS
12.9 IMPACT OF WORKING CAPITAL RISKS
12.10 WORKING CAPITAL RISK MITIGANTS
12.11 WORKING CAPITAL FINANCING
QUESTIONS/EXERCISES
Part IV: Credit Portfolio Risks
Chapter 13: Credit Portfolio Fundamentals
13.1 CREDIT PORTFOLIO VS. EQUITY PORTFOLIO
13.2 CRITICALITY OF PORTFOLIO CREDIT RISKS
13.3 BENEFITS OF CREDIT PORTFOLIO STUDY
13.4 PORTFOLIO ANALYSIS
13.5 CREDIT PORTFOLIO RISK VS. RETURN
APPENDIX: ORGANIZATIONAL CONFLICT IN CREDIT RISK MANAGEMENT
QUESTIONS/EXERCISES
Chapter 14: Major Portfolio Risks
14.1 SYSTEMATIC RISK
14.2 DIVERSIFIABLE RISK
14.3 CONCENTRATION
14.4 CREDIT PORTFOLIO BETA
QUESTIONS/EXERCISES
Chapter 15: Firm Risks to Portfolio Risks and Capital Adequacy
15.1 OBLIGOR PD AND PORTFOLIO PD
15.2 MIGRATION RISK
15.3 DEFAULT RISK
15.4 LOSS GIVEN DEFAULT (LGD)
15.5 EXPECTED LOSS (EL)
15.6 PROVISIONING
15.7 CREDIT LOSS DISTRIBUTION
15.8 ECONOMIC CAPITAL
QUESTIONS/EXERCISES
Chapter 16: Credit Risk and The Basel Accords
16.1 BASEL ACCORDS
16.2 BASEL I (1988) – FIRST BASEL ACCORD
16.3 BASEL ACCORD II (2006)
16.4 BASEL III
APPENDIX
QUESTIONS/EXERCISES
Part V: Portfolio Risk Mitigants
Chapter 17: Credit Risk Diversification
17.1 TRADITIONAL DIVERSIFICATION
17.2 MODERN DIVERSIFICATION OF CREDIT PORTFOLIO
17.3 CORRELATIONS IN CREDIT RISK MODELS
QUESTIONS/EXERCISES
Chapter 18: Trading of Credit Assets
18.1 SYNDICATED LOANS/CREDIT ASSETS
18.2 SECURITIZATION
18.3 DISTRESSED DEBT
18.4 FACTORING
18.5 DISTRESSED RECEIVABLES
QUESTIONS/EXERCISES
Chapter 19: Credit Derivatives
19.1 MEANING OF A CREDIT DERIVATIVE
19.2 CREDIT DEFAULT SWAP (CDS)
19.3 TOTAL RETURN SWAP
19.4 CREDIT OPTION (CO)
19.5 CREDIT SPREAD OPTIONS (CSO)
19.6 CREDIT DERIVATIVE LINKED STRUCTURES
19.7 FUTURE OF CREDIT DERIVATIVES
19.8 CREDIT DERIVATIVES AND OVER-THE-COUNTER (OTC) MARKETS
QUESTIONS/EXERCISES
Part VI: Credit Risk Pricing
Chapter 20: Pricing Basics
20.1 CREDIT PRICING FACTORS
20.2 PRICING STRUCTURE
20.3 CREDIT RISK PRICING MODEL
20.4 PRIME LENDING RATE
QUESTIONS/EXERCISES
Chapter 21: Pricing Methods
21.1 RORAC (RETURN ON RISK-ADJUSTED CAPITAL) BASED PRICING
21.2 MARKET DETERMINED
21.3 ECONOMIC PROFIT BASED PRICING
21.4 COST PLUS
21.5 STRUCTURED PRICING
21.6 GRID PRICING
21.7 NET PRESENT VALUE (NPV) PRICING
21.8 RANPV (RISK-ADJUSTED NPV) PRICING
QUESTIONS/EXERCISES
Part VII: The Last Line of Defence — Security
Chapter 22: Security Basics
22.1 NEED FOR SECURITY
22.2 MERITS AND DEMERITS OF A SECURITY
22.3 ATTRIBUTES OF A GOOD SECURITY
22.4 SECURITY AND PRICING
22.5 IMPACT OF SYSTEMATIC RISKS ON SECURITY
22.6 FACILITY GRADES
QUESTIONS/EXERCISES
Chapter 23: Collaterals and Covenants
23.1 TANGIBLE SECURITY
23.2 INTANGIBLE SECURITY
23.3 METHODS OF TAKING SECURITY
23.4 REALIZING SECURITY
23.5 COVENANTS – A TRIGGER TO SEEK ADDITIONAL SECURITY
QUESTIONS/EXERCISES
Part VIII: Credit Crisis
Chapter 24: Road to Credit Crisis
24.1 CREDIT AND GROWTH
24.2 ROLE OF BANKS
24.3 FORMATION OF CREDIT BUBBLES
24.4 TYPES OF CREDIT BUBBLE
24.5 CREDIT BUBBLE EXPLOSION
QUESTIONS/EXERCISES
Chapter 25: 2008 Credit Crisis
25.1 CREDIT ASSET – PRIME VS. SUB-PRIME
25.2 SECURITIZATION
25.3 US HOUSING BUBBLE4
25.4 ROLE OF OTC DERIVATIVES
25.5 ROLE OF RATING AGENCIES
25.6 WHY DID THE BUBBLE BURST?
25.7 CONSEQUENCES
25.8 IMPACT OF THE LEHMAN COLLAPSE
25.9 HOUSING CRISIS TO CREDIT CRISIS TO ECONOMIC CRISIS
25.10 COMMON FACTORS 1929 vs. 2009
25.11 LESSONS OF THE 2008 CREDIT CRISIS

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