Book Description
The financial industry is swamped by credit products whose economic performance is linked to the performance of some underlying portfolio of credit-risky instruments, like loans, bonds, swaps, or asset-backed securities. Financial institutions continuously use these products for tailor-made long and short positions in credit risks. Based on a steadily growing market, there is a high demand for concepts and techniques applicable to the evaluation of structured credit products. Written from the perspective of practitioners who apply mathematical concepts to structured credit products, Structured Credit Portfolio Analysis, Baskets & CDOs starts with a brief wrap-up on basic concepts of credit risk modeling and then quickly moves on to more advanced topics such as the modeling and evaluation of basket products, credit-linked notes referenced to credit portfolios, collateralized debt obligations, and index tranches. The text is written in a self-contained style so readers with a basic understanding of probability will have no difficulties following it. In addition, many examples and calculations have been included to keep the discussion close to business applications. Practitioners as well as academics will find ideas and tools in the book that they can use for their daily work.
Customer Reviews:
Disappointing.......2007-09-13
I had to return this book. There are other books on credit derivatives and CDOs that are much better. This book deals with an important subject but in a very poor way.
Structured Credit Portfolio Analysis, Baskets and CDOs.......2007-06-01
Excellent book on structured credit. However, the authors could have placed more explicit numerical examples. Perhaps a new version could be updated with more explicit numerical examples?
Good book to read cover to cover.
Book Description
The estimation and validation of the Basel II risk parameters PD (default probability), LGD (loss given default), and EAD (exposure at default) is an important problem in banking practice. These parameters are used on the one hand as inputs to credit portfolio models, on the other to compute regulatory capital according to the new Basel rules. The book covers the state-of-the-art in designing and validating rating systems and default probability estimations. Furthermore, it presents techniques to estimate LGD and EAD. A chapter on stress testing of the Basel II risk parameters concludes the monograph.
Customer Reviews:
A good introduction.......2007-08-07
For anyone who needs to learn the financial philosophy and mathematical formalism behind the Basel II accords, this book will be an excellent introduction. Consisting of a collection of articles written competently and concisely, the book should be on the shelf of those who are not only responsible for implementing the Basel II accords but also work in the trenches on how to validate it with respect to the banking institutions in which they are employed. The technical details behind the Basel II accords are straightforward to understand mathematically, but the accords can be delicate to implement from a data collection standpoint. However the latter is not addressed in this book, with emphasis primarily given to the formalism and how to validate it in real situations.
Due to its mathematical rigor the chapter on PD validation by R. Rauhmeier is one of the more valuable ones in the book. It deals with mathematical methods for assessing the quality of estimates for PD, but gives examples from practical banking experience. Most interesting is that the author discusses how to compare rating systems developed by human experts with those that result from machines (algorithmic ratings with no human input). Along these lines, the author views a rating system as essentially a collection of modules, the first one of which is called a `machine rating' since it estimates the PD by an algorithm based on statistical models and not therefore dependent on human judgment (excluding the judgment of the developer of the algorithm of course). The machine rating is then subjected to expert opinion in the second module, wherein it is expected that the rating will be adjusted according to the judgments (and biases) of the (human) expert. The third module is also very standardized, and deals with the degree to which the borrower is supported by others when in financial distress. Any support structure that exists will of course influence the PD of the borrower. Manual overrides that arise because of exceptional situations are part of the fourth and final module. The author views the rating model as `default generating process' which is function of certain selected risk drivers, and is typically measured in terms of rating scales. He gives an example of a `master scale' in this chapter, with this one deploying a "point-in-time" rating approach.
Most of the chapter is devoted to finding PD validation methods that can test all the rating grades simultaneously. One of these is the Spiegelhalter test, which uses as a test statistic the ratio of the difference between the observed mean square error and the expected mean square and the square root of the variance of the mean square error. If the null hypothesis, namely that the forecasted and observed default probabilities are equal for every obligor, then this ratio is normally distributed and then standard techniques can be used. The Spiegelhalter test helps to remove the bias that exists in merely averaging the PDs of obligors in the same rating grade, but it does assume that the default events are independent. The assumption that the default events are independent can be dropped by using Monte Carlo simulations, and the author gives the reader a taste of how to do this in this chapter. As is typical in Monte Carlo simulations, random paths are generated in order to approximate the distribution of the test statistic. The author discusses an explicit simulation study using various choices of the asset correlation parameter, and it is clear that its value has a dramatic effect on the distribution of the test statistic. It would have been helpful if the author had expounded on how to calculate the value of the asset correlation parameter and discussed its connection with various credit risk models, such as the Merton model.
The last chapter of the book discusses stress testing, which the authors define as the study of risk characteristics to fictional perturbations or shocks. Stress testing is practiced widely in the financial industry, especially when sudden and dramatic losses occur in credit portfolios. These losses can surprise risk managers and create extreme skepticism towards the mathematical models used for forecasting. It follows of course that the Basel II accords would be interested in stress testing, but the authors of this chapter assert that they do not yet have the level of sophistication that one can find in the financial industry nor are they precise. The methods that the Basel II accords recommend are reviewed in this chapter. In this regard the authors point out that it is the probability of default (PD) that is the parameter of interest for stress testing, since the EAD and the LGD are relatively insensitive to radical events by their very definition. The PD is varied either by modifying rating grades or by modifying the PDs of the rating grades used for the stress test. The authors give an example of a stress test involving a very well-diversified "virtual" portfolio which shows the effects on regulatory and economic capital of various shocks, such as dramatic rises (and drops) in the oil price, recessions, and appreciative drops in the stock market index. Real portfolios they argue will exhibit even more dramatic effects, since they are not as diversified as this example. It would have been more helpful if the authors had included a more rigorous analysis, possibly one that uses Monte Carlo simulations or extreme value theory, but as applied to a practical situation that risk managers might encounter. One example might be the extreme losses that occurred in mortgage portfolios beginning in the third quarter of 2006. These losses took the risk community completely by surprise, and the forecasting models in place at the time, even though they underwent considerable stress testing before these losses began accelerating, were unable to predict them. The lesson to be learned from this example is that one must perform stress testing not with scenarios that may not have occurred in the past. The imagining of hypothetical scenarios that may shock a portfolio but that have never been realized in the past will be an important part of the future game of stress testing.
Good practice cooke book.......2007-05-21
Good by all segments of Basel II risk components. Especially on EAD, LGD and partly on retail the domains not so frequently worked out in other similar book. Perhaps some more effort on retail, concentrationa and economic capital. But that could be a new book allready. Stress test domain is good example.
Book Description
A cutting-edge text on credit portfolio management
Credit risk. A number of market factors are causing revolutionary changes in the way it is measured and managed at financial institutions. Charles Smithson, author of the bestselling Managing Financial Risk, introduces a portfolio management approach to credit in his latest book. Understanding how to manage the inherent risks of this market has become increasingly important over the years. Credit Portfolio Management provides readers with a complete understanding of the alternative approaches to credit risk measurement and portfolio management. This definitive guide discusses the pricing and managing of credit risks associated with a variety of off-balance-sheet products such as credit default swaps, total return swaps, first-to-default baskets, and credit spread options; as well as on-balance-sheet customized structured products such as credit-linked notes, repackage notes, and synthetic collateralized debt obligations (CDOs). Filled with expert insight and advice, this book is a must-read for all credit professionals.
Charles W. Smithson, PhD (New York, NY), is the Managing Partner of Rutter Associates and Executive Director of the International Association of Credit Portfolio Managers (IACPM). He is the author of five books, including The Handbook of Financial Engineering and Managing Financial Risk (now in its Third Edition).
Book Description
The introduction of the euro in 1999 marked the starting point of the development of a very liquid and heterogeneous EUR credit market, which exceeds EUR 350bn with respect to outstanding corporate bonds. As a result, credit risk trading and credit portfolio management gained significantly in importance. The book shows how to optimize, manage, and hedge liquid credit portfolios, i.e. applying innovative derivative instruments. Against the background of the highly complex structure of credit derivatives, the book points out how to implement portfolio optimization concepts using credit-relevant parameters, and basic Markowitz or more sophisticated modified approaches (e.g., Conditional Value at Risk, Omega optimization) to fulfill the special needs of an active credit portfolio management on a single-name and on a portfolio basis (taking default correlation within a credit risk model framework into account). This includes appropriate strategies to analyze the impact from credit-relevant newsflow (macro- and micro-fundamental news, rating actions, etc.). As credits resemble equity-linked instruments, we also highlight how to implement debt-equity strategies, which are based on a modified Merton approach.
The book is obligatory for credit portfolio managers of funds and insurance companies, as well as bank-book managers, credit traders in investment banks, cross-asset players in hedge funds, and risk controllers.
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Taming Risk: Complete Credit Portfolio Management
Mark Fisher
Manufacturer: Euromoney Institutional Investor
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Explains the background, size and growth of the credit markets, the nature of credit risk, the historical pattern of credit returns, the approach of the rating agencies and the motivation for credit portfolio management. Why and how has the credit market reached its current size? What is the scope and complexity of the various credit sectors? Why it is likely to grow rapidly in the future?
Book Description
HIGH-YIELD BONDS provides state-of-the-art research, strategies, and toolsÑalongside the expert analysis of respected authorities including Edward Altman of New York UniversityÕs Salomon Center, Lea Carty of MoodyÕs Investor Service, Sam DeRosa-Farag of Donaldson, Lufkin & Jenrette, Martin Fridson of Merrill Lynch & Company, Stuart Gilson of Harvard University, Robert Kricheff of CS First Boston, and Frank Reilly of the University of Notre DameÑto help you truly understand todayÕs high-yield market. For added value and ease of reference, this high-level one-volume encyclopedia is divided into seven sections detailing virtually every aspect of high-yield bond investment. They include: Market structureÑThe role of investment banks in security innovation and market development, evolution of analytical methodologies, and recent leveraged loan market developments; Security risk analysisÑHistorical bond default rates, real interest rate and default rate relationships, and new simulation methodologies for modeling credit quality; Security valuationÑImpact of seniority and security on bond pricing and return, important trading factors, and a Monte Carlo simulation methodology for valuing bonds and options in the context of correlated interest rate and credit risk; Market valuation modelsÑEconometric studies which detail the importance of monetary influences, risk-free interest rates, default rates, mutual fund flows, and seasonal fluctuations; Portfolio managementÑHistorical perspective and comparison to alternative investments, analysis of indices available to investors, and specific portfolio selection and risk management strategies of professional fund managers; Distressed security investingÑHistorical risk and return information, plus an academic overview of the market and decision criteria for uncovering and investing in securities with higher-than-average risk-adjusted returns; Corporate finance considerationsÑEmerging firmsÕ strategic choice between external debt and equity financing, as well as the choice of issuing public versus private (Rule-144a) securities. HIGH-YIELD BONDS provides extensive coverage of bond valuation and the construction and management of high-yield portfolios. Advanced Monte Carlo simulation models for the valuation of bonds and options on bonds as well as risk assessments on portfolios of bonds under conditions of correlated interest rate and credit risk are demonstrated. In todayÕs explosive environment of multiple new issues and high risk versus return relationships, it is paramount that you get advice from analysts and experts who have been influential in shaping and defining the market. HIGH-YIELD BONDS will provide you with a valuable reference to this fascinating and constantly changing class of securities, helping you assemble a stable, diversified portfolio of fixed income investments that provides the greatest returns and the lowest risks.
Download Description
HIGH-YIELD BONDS delivers statistics, research findings, and facts to help you understand the risks - and maximize the returns - of high-yield investing.
Customer Reviews:
The best HY Omnibus book so far........2007-01-11
This is an excellent book that is now showing its age and needs an update. It also lacks a CDROM with data sets which would make more explicit many of the points authors make. In addition, Drexel Burnham Lambert, like Banquo's ghost, is alluded to on nearly every other page, yet the authors here are hesitant to differentiating between high yield bonds (non-investment grade debt) and junk (anything issued by Michael Milken).
This work also glaringly lacks some crucial work by Paul Asquith on seasoned high yield bond defaults. Don't stop here.
The best HY book........2000-02-08
I can't say enough about this book. The book is suprisingly easy to read, and uncovers insights from some of the most prominent names in HY research. A must for HY analysts, MBAs, and CFOs.
The Best Guide Book to High Yield Bonds Ever.......1999-01-07
I have had the privilege of reading the galley proofs of this book and find it to be THE definitive word on High Yield Investing. This book develops the blueprint for how to navigate, understand, and analyze High Yield Bonds. A must for MBA students, a requirement for anyone in the field already, and a vital tool for investors.
The book's three authors (The George Washington University Business School, Georgetown Business School, and 20+ years High Yield Experience) have used their knowledge and connections to get the best information available
Average customer rating:
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Credit Risk: From Transaction to Portfolio Management (Securities Institute Global Capital Markets)
Andrew Kimber
Manufacturer: Butterworth-Heinemann
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ASIN: 0750656670 |
Book Description
'Credit Risk: from transaction to portfolio management' provides high level, focused analysis of the nature of credit risk in investment bank portfolio management. Written by experienced international practitioners, it offers in-depth information and advice that will help all those charged with managing credit risk at the sharp end.
Credit Risk Management strives to protect the capital and reputation of the bank while preserving its franchise and optimising long-term profitability. These goals are achieved by:
* Recommending suitable credit policies and guidelines
* Performing due diligence on the banks' customers
* Incorporating both quanitative and qualitative analysis to balance risk and return
* Providing creative advice to facilitate client transactions
* Coordinating legal and operational issues
* Embracing technological change to enhance bank effectiveness
'Credit Risk' provides financial institutions and their staff with everything they need to know about how to control and manage credit risk. It gives sound analysis of trading strategies and complex derivative product, offers an understanding of settlement procedures and legal issues, and shows how to accurately quantify and measure related risks.
Written by professionals for professionals - authors are from two of the world's largest international investment banksIn-depth, focused informationHigh level, comprehensive analysis of the subject
Book Description
Measuring and Controlling Interest Rate and Credit Risk provides keys to using derivatives to control interest rate risk and credit risk, and controlling interest rate risk in a mortgage-backed securities derivative portfolio. This book includes information on measuring yield curve risk, swaps and exchange-traded options, TC options and related products, and describes how to measure and control the interest rate of risk of a bond portfolio or trading position.
Measuring and Controlling Interest Rate and Credit Risk is a systematic evaluation of how to measure and control the interest rate risk and credit risk of a bond portfolio or trading position, defining key points in the process of risk management as related to financial situations. The authors construct a verbal flow chart, defining and illustrating interest rate risk and credit risk in regards to valuation, probability distributions, forecasting yield volatility, correlation and regression analyses. Hedging instruments discussed include futures contracts, interest rate swaps, exchange traded options, OTC options, and credit derivatives. The text includes calculated examples and readers will learn how to measure and control the interest rate risk and credit risk of a bond portfolio or trading position. They will discover value at risk approaches, valuation, probability distributions, yield volatility, futures, interest rate swaps, exchange traded funds; and find in-depth, up-to-date information on measuring interest rate with derivatives, quantifying the results of positions, and hedging.
Frank J. Fabozzi (New Hope, PA) is a financial consultant, the Editor of the Journal of Portfolio Management, and an Adjunct Professor of Finance at Yale Universitys School of Management.
Steven V. Mann (Columbia, SC) is Professor of Finance at the Moore School of Business, University of South Carolina. Moorad Choudhry (Surrey, UK) is a Vice President with JPMorgan Chase structured finance services in London.
Moorad Choudhry (Surrey, England) is a senior Fellow at the Centre for Mathematical Trading and Finance, CASS Business School, London, and is Editor of the Journal of Bond Trading and Management. He has authored a number of books on fixed income analysis and the capital markets. Moorad began his City career with ABN Amro Hoare Govett Sterling Bonds Limited, where he worked as a gilt-edged market maker, and Hambros Bank Limited where he was a sterling proprietary trader. He is currently a vice-president in Structured Finance Services with JPMorgan Chase Bank in London.
Book Description
Expert guidance on managing credit risk in bond portfolios
Managing Credit Risk in Corporate Bond Portfolios shows readers how to measure and manage the risks of a corporate bond portfolio against its benchmark. This comprehensive guide explores a wide range of topics surrounding credit risk and bond portfolios, including the similarities and differences between corporate and government bond portfolios, yield curve risk, default and credit migration risk, Monte Carlo simulation techniques, and portfolio selection methods.
Srichander Ramaswamy, PhD (Basel, Switzerland), is Head of Investment Analysis at the Bank for International Settlements (BIS) in Basel, Switzerland, and Adjunct Professor of Banking and Finance, University of Lausanne.
Download Description
Expert guidance on managing credit risk in bond portfolios
Managing Credit Risk in Corporate Bond Portfolios shows readers how to measure and manage the risks of a corporate bond portfolio against its benchmark. This comprehensive guide explores a wide range of topics surrounding credit risk and bond portfolios, including the similarities and differences between corporate and government bond portfolios, yield curve risk, default and credit migration risk, Monte Carlo simulation techniques, and portfolio selection methods.
Srichander Ramaswamy, PhD (Basel, Switzerland), is Head of Investment Analysis at the Bank for International Settlements (BIS) in Basel, Switzerland, and Adjunct Professor of Banking and Finance, University of Lausanne.
Customer Reviews:
A Must Read for all 'Traditional' Fixed Income Managers.......2003-11-30
This book does indeed fill an important gap in the literature - in bridging the quant and the strategist.
Simply put, the author has assembled a very readable set of ingredients from which one could 'proficiently' manage a corporate bond mandate.
The chapters on credit portfolio risk measurement and optimization are very informative and leave the right questions open to interpretation and future research.
The collection of analytical and simulation based approaches and empirical results is excellent and useful for everyone - no matter what the level of experience or expertise of the reader.
The reason for 4 stars is that I feel too much time was spent on discussing the KMV approach (which although well-known, has a number of weaknesses), not quite enough time was spent on the development of simulation-based approaches, and the author does not attempt to integrate market and credit risks directly.
This being said - there is enough detail in this book to lead the inquisitive reader into these subjects in more detail with a great background.
Excellent book
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Active Bank Risk Management: Enhancing Investment and Credit Portfolio Performance
Globecon Group
Manufacturer: Probus Publishing Co.
ProductGroup: Book
Binding: Hardcover
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ASIN: 1557387583 |
Book Description
Active Bank Risk Management Supplies powerful banking expertise on current financial issues and topics, including discussion on the people, the instruments and strategies that are key to the market. This innovative text tackles policies, procedures and pricing as well as legal and regulatory issues for finanical institutions with significant interest in trading, investing, corporate lending and generating shareholder value. This thorough review tackles the types of risk most likely to impact these institutions as well as management strategies and solutions, including: Credit and interest rate risk; Portfolio management; Capital standards; Risk management policies and procedures; Risk-based pricing for financial institutions. Active Bank Risk Management is the perfect tool for the banker trying to minimize, manage and price accordingly for banking risk.
Books:
- Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications (New York Institute of Finance)
- The 2007 Microsoft Office System Step by Step
- The ART of Risk Management
- The Attachment Parenting Book : A Commonsense Guide to Understanding and Nurturing Your Baby
- The Berenstain Bears' Trouble with Money (First Time Books(R))
- The Black Belt Memory Jogger: A Pocket Guide for Six Sigma Success
- The Credit Secrets Bible
- The Essentials of Risk Management
- The Financial System and the Economy: Principles of Money and Banking (with InfoTrac®)
- The Financial System and the Economy: Principles of Money and Banking (with InfoTrac®)
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