By Jeffrey R. Bohn
State of the art suggestions and instruments had to facilitate potent credits portfolio administration and strong quantitative credits research
choked with in-depth insights and specialist recommendation, energetic credits Portfolio administration in perform serves as a accomplished creation to either the speculation and real-world perform of credits portfolio administration. The authors have written a textual content that's technical sufficient either by way of history and implementation to hide what practitioners and researchers want for really using a majority of these chance administration instruments in huge corporations yet which whilst, avoids technical proofs in desire of genuine applications. all through this e-book, readers may be brought to the theoretical foundations of this self-discipline, and know about structural, reduced-form, and econometric types effectively utilized in the marketplace this day. The e-book is stuffed with hands-on examples and anecdotes. conception is illustrated with functional program. The authors' web site presents extra software program instruments within the type of Excel spreadsheets, Matlab code and S-Plus code. every one part of the publication concludes with evaluation questions designed to spark extra dialogue and mirrored image at the options awarded.
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This is often one of many only a few books that makes a speciality of the qualitative danger administration methodologies of either banks and insurance firms in a single position. It additionally advantages from the actually world-class individuals who're the world over famous for his or her services during this zone. Who should still learn this booklet?
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Extra resources for Active Credit Portfolio Management in Practice
As mentioned earlier in this chapter, in the late 1980s, BIS published a global banking accord designed to eliminate the advantage Japanese banks seemed to hold in gaining access to cheap funding. Basel I, as the accord is now called, outlined for banks the appropriate levels of capital they should hold for given classes of risk. It did this in broad terms with the goal of creating a common language of regulatory capital risk rather than of outlining detailed risk management strategies. However, in hindsight, while it was an important step forward, the blunt nature of Basel I created opportunities for regulatory arbitrage in which a 14 ACTIVE CREDIT PORTFOLIO MANAGEMENT IN PRACTICE bank could take advantage of situations in which the rules unintentionally led institutions away from economically profitable transactions.
The draining of liquidity in the structured credit market in 2007 and 2008, particularly for collateralized loan obligations, has set the market back somewhat as the ability to hedge with structured credit has diminished. More recently, questions have arisen regarding potential misuse of leverage in constructing portfolios of CDS contracts, and more investment and transparency is needed in the infrastructure of settling CDS trades. These challenges have made all market participants more focused on how to better develop this important tool for managing credit risk.
This is fundamentally different along a number of dimensions than market risk, which encompasses changes in a security’s value as driven by variables such as interest rates, equity prices, commodity prices, and foreign exchange. Financial practitioners have settled on models and systems in the field of market risk much more quickly than in the field of credit risk. The availability of data and liquid markets in instruments such as interest-rate swaps and other derivatives has made it easier to introduce quantitative hedging and portfolio management techniques in the field of market risk for equity and other instruments, while the absence of data and the more complicated statistical relationships made it more difficult historically to do the same for credit risk.
Active Credit Portfolio Management in Practice by Jeffrey R. Bohn