Credit Risk Management and Basel II

An implementation guide

Publication Date	August 2006
Publisher	Risk Books
Product Type	Book
Pages	478
ISBN Number	1904339433
Product Code	RIS00351

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Summary

As a unique implementation guide covering the entire spectrum of credit risk management, this book will assist you with your credit risk policy and help you to facilitate the establishment of risk processes and procedures.

Having assessed the vast amount of existing literature on this subject Bhatia found the bulk of it to be deficient in many areas, this book fills in the gaps for you by:

Approaching explanations from a non- mathematical perspective, with the spirit behind the mathematics and equations explained in an accessible manner,
Taking a holistic approach, with an end-to-end analysis of the credit risk problem; and
Absorbing and integrating best practices echoed by the Basel Accord.

An excellent framework for analysis and implementation is provided and this information will be beneficial for a wide range of people from risk managers and compliance officers to credit risk administration personnel, front and middle office personnel, and students of GARP or financial engineering.

Content

Chapter 1. Introduction to Credit Risk Management
- History and evolution and challenge of credit risk management
- What is credit risk?
- Importance of credit risk measurement
- Analysing credit loss
- Analysing credit event
- Components of credit risk
- Measurement framework
- Types of credit risk
- Developments on the regulatory side (BIS framework)
Section I - Risk Measures
- Chapter 2. Risk Measures
  - Idiosyncratic risk
  - External factors
  - Risk indicators for credit loss
  - Risk indicators for PD
  - Risk indicators for loss given default
  - Risk indicators for exposures
  - Risk indicators for correlation
  - Concentration
  - Diversification
  - Granularity
  - Credit administration
  - Market and liquidity factors
Section Ii - Measuring Credit Risk Components
- Chapter 3. Exposure
  - Types of exposures
  - How to define exposures
  - Types of portfolios
  - Counter party risk
  - Exposure modifier
  - Appendix - convergence of trading and banking book
- Chapter 4. Credit ratings
  - Define default
  - Define PD
  - Define credit rating
  - External rating
  - Internal ratings
  - PD measurement
  - Rating securitisation tranches
  - Migration risk
  - Impact of maturity
  - Generally accepted credit rating practices
  - Best practices from Basel Accord
  - Overview of structural models
  - Overview of reduced form models
  - Overview of actuarial models
  - Overview of factor models
- Chapter 5. Risk Mitigation techniques
  - Risk mitigation techniques
  - Collateral
  - Credit risk transfers
  - Impact on exposure and LGD
  - Ineffective risk transfers
  - Dealing with double defaults
  - Basel approach
- Chapter 6. Loss Given Default
  - Definition of loss given default
  - Recovery rates
  - Issues in LGD
  - LGD Modelling
  - LGD measurement
  - PD/LGD correlation
  - Facility rating and LGD
  - Case study - loss calc
Section Iii - Credit Risk Architecture
- Chapter 7. Credit Risk Fortification
  - Credit risk management policies
  - Organisation structure
- Chapter 8. Credit Risk Valuations
  - Impairment
  - Accounting policies
  - Transition metrics
  - Structural models
  - Credit spread
  - Credit VaR and capital requirements
  - Instruments and valuation
  - Active portfolio management
  - Changing role of banks
Section Iii - Modelling and Simulating Credit Risk Components and Drivers
- Chapter 9. Modelling Credit Risk Components
  - Introduction
  - Modelling tools
  - Modelling credit risk components
  - Modelling correlation
  - Modelling correlation
  - Impact of correlation on portfolio
  - Modelling credit portfolios
  - Portfolio management tools
  - Portfolio management and fund management
  - Information systems
  - Case study of the traditional portfolio models
  - Measuring credit risk
  - Going forward
- Chapter 10. Model Validation
  - Model risk
  - Importance of validation for risk measurement
  - Overview of quantification process
  - Aims of validation techniques
  - Model validation techniques
  - Quantitative validation techniques
  - Developmental evidence
  - Simulation techniques
  - IS review techniques
  - Issues and concerns
  - Supervisory validation
  - Best practices
Section Iv - Implementing IT for Credit Risk Management
- Chapter 11. Information Technologies for Credit Risk Management
  - Introduction
  - Importance of IT for credit risk management
  - Data collection mechanisms
  - Software for risk components - models
  - Software for portfolio models
  - Risk management software
  - Estimating capital
Summary of reports / papers
- Bibliography