SlideShare a Scribd company logo

Credit Risk Management Primer

•Download as PPT, PDF•
•
av vedpuriswar
av vedpuriswar

Overview of Credit Risk Management for MBA students

Economy & FinanceTechnology
1 of 55
Credit Risk Management Primer September 16, 2009 By A. V. Vedpuriswar
Introduction to Credit Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Understanding Credit Risk ,[object Object],[object Object],[object Object],[object Object],[object Object]
Banking and trading books ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
The Building blocks of Credit Risk Management ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Probability of Default ,[object Object],[object Object],[object Object],[object Object]
Estimating Probability of Default ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Credit Rating ,[object Object],[object Object],[object Object],[object Object]
Default events ,[object Object],[object Object],[object Object]
Transition Matrices ,[object Object],[object Object],[object Object],[object Object]
Exposure at Default ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Loss Given Default ,[object Object],[object Object],[object Object],[object Object]
Factors affecting LGD ,[object Object],[object Object],[object Object]
Average cumulative default rates (%), 1970-2003 ( Source: Moody’s) Rating Term (Years) 1 2 3 4 5 7 10 15 20 Aaa 0.00 0.00 0.00 0.04 0.12 0.29 0.62 1.21 1.55 Aa 0.02 0.03 0.06 0.15 0.24 0.43 0.68 1.51 2.70 A 0.02 0.09 0.23 0.38 0.54 0.91 1.59 2.94 5.24 Baa 0.20 0.57 1.03 1.62 2.16 3.24 5.10 9.12 12.59 Ba 1.26 3.48 6.00 8.59 11.17 15.44 21.01 30.88 38.56 B 6.21 13.76 20.65 26.66 31.99 40.79 50.02 59.21 60.73 Caa 23.65 37.20 48.02 55.56 60.83 69.36 77.91 80.23 80.23
Recovery rates on corporate bonds as a percent of face value, 1982-2004. ( Source : Moody’s). Class Average recovery rate (%) Senior secured 57.4 Senior unsecured 44.9 Senior subordinated 39.1 Subordinated 32.0 Junior subordinated 28.9
Problem ,[object Object]
[object Object],[object Object],[object Object],[object Object]
Problem ,[object Object]
[object Object],[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object]
Problem ,[object Object]
[object Object],[object Object],[object Object],[object Object]
Calculating probability of default from bond yields ,[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Significance of Credit spread ,[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Problem ,[object Object],[object Object],[object Object],[object Object]
Solution ,[object Object],[object Object],Risk free bond Corporate bond Year Cash flow PV factor e -(.03)t PV PV factor e -(.05)t PV .5 2 .9851 1.9702 .9754 1.9508 1.0 2 .9704 1.9408 .9512 1.9024 1.5 2 .9560 1.9120 .9277 1.8554 2.0 2 .9418 1.8836 .9048 1.8096 2.5 2 .9277 1.8554 .8825 1.7650 3.0 2 .9139 1.8278 .8607 1.7214 3.5 2 .9003 1.8006 .8395 1.679 4.0 102 .8869 90.4638 .8187 83.51 103.6542 96.21
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution (Cont…) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution (Cont…) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution (Cont…) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution (Cont…) ,[object Object],[object Object],[object Object],Default point (Years) Expected losses PV 1 (104.78 – 30)Q = 74.78Q (74.78)Qe -.03 = 72.57Q 2 (103.88 – 30)Q = 73.78Q (73.88)Qe -.06 = 69.58Q 3 (102.95 – 30)Q = 72.95Q (72.95)Qe -.09 = 66.67Q 4 (102 – 30)Q = 72 Q (72)Qe -.12 = 63.86Q 272.68 Q
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object]
Problem ,[object Object],[object Object],[object Object],[object Object],[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object]
Problem ,[object Object],[object Object],[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Problem
[object Object],[object Object],[object Object],[object Object],[object Object],Solution
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Problem
[object Object],[object Object],[object Object],Solution

Recommended

Credit Risk Management Primer
Credit Risk Management PrimerCredit Risk Management Primer
Credit Risk Management Primerav vedpuriswar
 
Credit risk
Credit riskCredit risk
Credit riskUjjwal 'Shanu'
 
01.2 credit risk factors and measures
01.2 credit risk factors and measures01.2 credit risk factors and measures
01.2 credit risk factors and measurescrmbasel
 
Credit risk mgt
Credit risk mgtCredit risk mgt
Credit risk mgtsamarpita27
 
A study of credit risk management in commercial banks
A study of credit risk management in commercial banksA study of credit risk management in commercial banks
A study of credit risk management in commercial banksWriteKraft Dissertations
 
Credit risk management (2)
Credit risk management (2)Credit risk management (2)
Credit risk management (2)Ujjwal 'Shanu'
 
9_Advanced Credit Risk Management Methods
9_Advanced Credit Risk Management Methods9_Advanced Credit Risk Management Methods
9_Advanced Credit Risk Management MethodsDr Darren O'Connell AGIA
 
Credit risk (3)
Credit risk (3)Credit risk (3)
Credit risk (3)Ujjwal 'Shanu'
 

Recommended

Credit Risk Management Primer
Credit Risk Management PrimerCredit Risk Management Primer
Credit Risk Management Primerav vedpuriswar
 
Credit risk
Credit riskCredit risk
Credit riskUjjwal 'Shanu'
 
01.2 credit risk factors and measures
01.2 credit risk factors and measures01.2 credit risk factors and measures
01.2 credit risk factors and measurescrmbasel
 
Credit risk mgt
Credit risk mgtCredit risk mgt
Credit risk mgtsamarpita27
 
A study of credit risk management in commercial banks
A study of credit risk management in commercial banksA study of credit risk management in commercial banks
A study of credit risk management in commercial banksWriteKraft Dissertations
 
Credit risk management (2)
Credit risk management (2)Credit risk management (2)
Credit risk management (2)Ujjwal 'Shanu'
 
9_Advanced Credit Risk Management Methods
9_Advanced Credit Risk Management Methods9_Advanced Credit Risk Management Methods
9_Advanced Credit Risk Management MethodsDr Darren O'Connell AGIA
 
Credit risk (3)
Credit risk (3)Credit risk (3)
Credit risk (3)Ujjwal 'Shanu'
 
Presentation on credit risk
Presentation on credit risk Presentation on credit risk
Presentation on credit risk Md Abdullah Al Mamun
 
Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk ManagementMaryum Sarwar
 
Credit Risk
Credit RiskCredit Risk
Credit RiskBarendra Kumar Bisoyi
 
"Credit Risk-Probabilities Of Default"
"Credit Risk-Probabilities Of Default""Credit Risk-Probabilities Of Default"
"Credit Risk-Probabilities Of Default"Arun Singh
 
Credit Risk Management Presentation
Credit Risk Management PresentationCredit Risk Management Presentation
Credit Risk Management PresentationSumant Palwankar
 
Credit Risk Modelling Primer
Credit Risk Modelling PrimerCredit Risk Modelling Primer
Credit Risk Modelling Primerav vedpuriswar
 
Presentation6 credit risk (Bank Management)
Presentation6 credit risk (Bank Management)Presentation6 credit risk (Bank Management)
Presentation6 credit risk (Bank Management)Dias Satria
 
Credit risk models
Credit risk modelsCredit risk models
Credit risk modelsUjjwal 'Shanu'
 
Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk ManagementFarouk Nasser
 
Credit risk management
Credit risk managementCredit risk management
Credit risk managementazmatmengal
 
Credit risk management
Credit risk managementCredit risk management
Credit risk managementGokul K Prasad
 
Credit Management Practices of BDBL
Credit Management Practices of BDBLCredit Management Practices of BDBL
Credit Management Practices of BDBLKhan Tanjeel Ahmed
 
Bank Credit Risk Management - Thomas FitzGibbon
Bank Credit Risk Management - Thomas FitzGibbonBank Credit Risk Management - Thomas FitzGibbon
Bank Credit Risk Management - Thomas FitzGibbonThomas P. FitzGibbon III
 
Credit risk management and Exchange rate risk management
Credit risk management and Exchange rate risk managementCredit risk management and Exchange rate risk management
Credit risk management and Exchange rate risk managementkamakshi potti
 
The 8 Steps of Credit Risk Management
The 8 Steps of Credit Risk ManagementThe 8 Steps of Credit Risk Management
The 8 Steps of Credit Risk ManagementColleen Beck-Domanico
 
Introduction to credit risk management
Introduction to credit risk managementIntroduction to credit risk management
Introduction to credit risk managementTOSHI STATS Co.,Ltd.
 
Jntu credit risk-management
Jntu credit risk-managementJntu credit risk-management
Jntu credit risk-managementShivaLeela Choudary
 
Chapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore University
Chapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore UniversityChapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore University
Chapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore UniversitySwaminath Sam
 
Credit Risk Management Problems
Credit Risk Management ProblemsCredit Risk Management Problems
Credit Risk Management Problemsav vedpuriswar
 
Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk ManagementAbdul Danka
 
Credit and financial risk analysis
Credit and financial risk analysisCredit and financial risk analysis
Credit and financial risk analysisMuhammadkhalid
 
Credit risk management
Credit risk managementCredit risk management
Credit risk managementUjjwal 'Shanu'
 

More Related Content

What's hot

Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk ManagementMaryum Sarwar
 
"Credit Risk-Probabilities Of Default"
"Credit Risk-Probabilities Of Default""Credit Risk-Probabilities Of Default"
"Credit Risk-Probabilities Of Default"Arun Singh
 
Credit Risk Management Presentation
Credit Risk Management PresentationCredit Risk Management Presentation
Credit Risk Management PresentationSumant Palwankar
 
Credit Risk Modelling Primer
Credit Risk Modelling PrimerCredit Risk Modelling Primer
Credit Risk Modelling Primerav vedpuriswar
 
Presentation6 credit risk (Bank Management)
Presentation6 credit risk (Bank Management)Presentation6 credit risk (Bank Management)
Presentation6 credit risk (Bank Management)Dias Satria
 
Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk ManagementFarouk Nasser
 
Credit risk management
Credit risk managementCredit risk management
Credit risk managementazmatmengal
 
Credit risk management
Credit risk managementCredit risk management
Credit risk managementGokul K Prasad
 
Credit Management Practices of BDBL
Credit Management Practices of BDBLCredit Management Practices of BDBL
Credit Management Practices of BDBLKhan Tanjeel Ahmed
 
Bank Credit Risk Management - Thomas FitzGibbon
Bank Credit Risk Management - Thomas FitzGibbonBank Credit Risk Management - Thomas FitzGibbon
Bank Credit Risk Management - Thomas FitzGibbonThomas P. FitzGibbon III
 
Credit risk management and Exchange rate risk management
Credit risk management and Exchange rate risk managementCredit risk management and Exchange rate risk management
Credit risk management and Exchange rate risk managementkamakshi potti
 
The 8 Steps of Credit Risk Management
The 8 Steps of Credit Risk ManagementThe 8 Steps of Credit Risk Management
The 8 Steps of Credit Risk ManagementColleen Beck-Domanico
 
Introduction to credit risk management
Introduction to credit risk managementIntroduction to credit risk management
Introduction to credit risk managementTOSHI STATS Co.,Ltd.
 
Chapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore University
Chapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore UniversityChapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore University
Chapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore UniversitySwaminath Sam
 
Credit Risk Management Problems
Credit Risk Management ProblemsCredit Risk Management Problems
Credit Risk Management Problemsav vedpuriswar
 

What's hot (19)

Presentation on credit risk
Presentation on credit risk Presentation on credit risk
Presentation on credit risk
 
Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk Management
 
Credit Risk
Credit RiskCredit Risk
Credit Risk
 
"Credit Risk-Probabilities Of Default"
"Credit Risk-Probabilities Of Default""Credit Risk-Probabilities Of Default"
"Credit Risk-Probabilities Of Default"
 
Credit Risk Management Presentation
Credit Risk Management PresentationCredit Risk Management Presentation
Credit Risk Management Presentation
 
Credit Risk Modelling Primer
Credit Risk Modelling PrimerCredit Risk Modelling Primer
Credit Risk Modelling Primer
 
Presentation6 credit risk (Bank Management)
Presentation6 credit risk (Bank Management)Presentation6 credit risk (Bank Management)
Presentation6 credit risk (Bank Management)
 
Credit risk models
Credit risk modelsCredit risk models
Credit risk models
 
Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk Management
 
Credit risk management
Credit risk managementCredit risk management
Credit risk management
 
Credit risk management
Credit risk managementCredit risk management
Credit risk management
 
Credit Management Practices of BDBL
Credit Management Practices of BDBLCredit Management Practices of BDBL
Credit Management Practices of BDBL
 
Bank Credit Risk Management - Thomas FitzGibbon
Bank Credit Risk Management - Thomas FitzGibbonBank Credit Risk Management - Thomas FitzGibbon
Bank Credit Risk Management - Thomas FitzGibbon
 
Credit risk management and Exchange rate risk management
Credit risk management and Exchange rate risk managementCredit risk management and Exchange rate risk management
Credit risk management and Exchange rate risk management
 
The 8 Steps of Credit Risk Management
The 8 Steps of Credit Risk ManagementThe 8 Steps of Credit Risk Management
The 8 Steps of Credit Risk Management
 
Introduction to credit risk management
Introduction to credit risk managementIntroduction to credit risk management
Introduction to credit risk management
 
Jntu credit risk-management
Jntu credit risk-managementJntu credit risk-management
Jntu credit risk-management
 
Chapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore University
Chapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore UniversityChapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore University
Chapter 3 - Risk Management - 2nd Semester - M.Com - Bangalore University
 
Credit Risk Management Problems
Credit Risk Management ProblemsCredit Risk Management Problems
Credit Risk Management Problems
 

Viewers also liked

Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk ManagementAbdul Danka
 
Credit and financial risk analysis
Credit and financial risk analysisCredit and financial risk analysis
Credit and financial risk analysisMuhammadkhalid
 
Credit risk management
Credit risk managementCredit risk management
Credit risk managementUjjwal 'Shanu'
 
Credit Risk Management ppt
Credit Risk Management pptCredit Risk Management ppt
Credit Risk Management pptSneha Salian
 
Credit risk management presentation
Credit risk management presentationCredit risk management presentation
Credit risk management presentationharsh raj
 

Viewers also liked (6)

Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk Management
 
Credit and financial risk analysis
Credit and financial risk analysisCredit and financial risk analysis
Credit and financial risk analysis
 
Credit risk management
Credit risk managementCredit risk management
Credit risk management
 
Credit Risk Management ppt
Credit Risk Management pptCredit Risk Management ppt
Credit Risk Management ppt
 
Credit risk management presentation
Credit risk management presentationCredit risk management presentation
Credit risk management presentation
 
Lecture 6
Lecture 6Lecture 6
Lecture 6
 

Similar to Credit Risk Management Primer

13.11.2008 Alm Jan 2008
13.11.2008 Alm Jan 200813.11.2008 Alm Jan 2008
13.11.2008 Alm Jan 2008deepakumari
 
Chapter 24_Risk Management in Financial Institutions
Chapter 24_Risk Management in Financial InstitutionsChapter 24_Risk Management in Financial Institutions
Chapter 24_Risk Management in Financial InstitutionsRusman Mukhlis
 
How does the math work
How does the math workHow does the math work
How does the math workBrooke Clark
 
Drsk bloomberg deafult risk
Drsk bloomberg deafult riskDrsk bloomberg deafult risk
Drsk bloomberg deafult riskdenurpramana
 
Cas rpm 2015 claim liability estimation
Cas rpm 2015 claim liability estimationCas rpm 2015 claim liability estimation
Cas rpm 2015 claim liability estimationAlejandro Ortega
 
Estimating Claim Liabilities - CAS RPM 2016
Estimating Claim Liabilities - CAS RPM 2016Estimating Claim Liabilities - CAS RPM 2016
Estimating Claim Liabilities - CAS RPM 2016Alejandro Ortega
 
valuation of financial assets financial tool.pptx
valuation of financial assets financial tool.pptxvaluation of financial assets financial tool.pptx
valuation of financial assets financial tool.pptxandrekuncoro1
 
Risky business: Guide to Risk Management
Risky business: Guide to Risk ManagementRisky business: Guide to Risk Management
Risky business: Guide to Risk ManagementMichael Le
 
1. introduction basics of investments.ppt
1. introduction basics of investments.ppt1. introduction basics of investments.ppt
1. introduction basics of investments.pptNavneet Jingar
 
Asset liability management
Asset liability managementAsset liability management
Asset liability managementTeena George
 
AIBB 202 Lesson 2.6: CRG & Internal Credit Risk Rating Systems (ICRRS)
AIBB 202 Lesson 2.6: CRG & Internal Credit Risk Rating Systems (ICRRS)AIBB 202 Lesson 2.6: CRG & Internal Credit Risk Rating Systems (ICRRS)
AIBB 202 Lesson 2.6: CRG & Internal Credit Risk Rating Systems (ICRRS)Saiful Islam
 
Invt Chapter 2 ppt.pptx best presentation
Invt Chapter 2 ppt.pptx best presentationInvt Chapter 2 ppt.pptx best presentation
Invt Chapter 2 ppt.pptx best presentationKalkaye
 
20 Reasons for Risk management updated 2023 intel document 15.docx
20 Reasons for Risk management updated 2023 intel document 15.docx20 Reasons for Risk management updated 2023 intel document 15.docx
20 Reasons for Risk management updated 2023 intel document 15.docxintel-writers.com
 
BankRISK Presentation
BankRISK PresentationBankRISK Presentation
BankRISK PresentationTriNovus LLC
 
Bond Markert & Alternative Investment Ruls.ppt
Bond Markert & Alternative Investment Ruls.pptBond Markert & Alternative Investment Ruls.ppt
Bond Markert & Alternative Investment Ruls.pptMuhammadWaliUllah10
 

Similar to Credit Risk Management Primer (20)

The low return of high yield
The low return of high yieldThe low return of high yield
The low return of high yield
 
13.11.2008 Alm Jan 2008
13.11.2008 Alm Jan 200813.11.2008 Alm Jan 2008
13.11.2008 Alm Jan 2008
 
Introduction to Interest Rrate Risk Management
Introduction to Interest Rrate Risk ManagementIntroduction to Interest Rrate Risk Management
Introduction to Interest Rrate Risk Management
 
Seminar 2 guidelines
Seminar 2 guidelinesSeminar 2 guidelines
Seminar 2 guidelines
 
Chapter 24_Risk Management in Financial Institutions
Chapter 24_Risk Management in Financial InstitutionsChapter 24_Risk Management in Financial Institutions
Chapter 24_Risk Management in Financial Institutions
 
Lecture004.pdf
Lecture004.pdfLecture004.pdf
Lecture004.pdf
 
How does the math work
How does the math workHow does the math work
How does the math work
 
Drsk bloomberg deafult risk
Drsk bloomberg deafult riskDrsk bloomberg deafult risk
Drsk bloomberg deafult risk
 
Cas rpm 2015 claim liability estimation
Cas rpm 2015 claim liability estimationCas rpm 2015 claim liability estimation
Cas rpm 2015 claim liability estimation
 
Estimating Claim Liabilities - CAS RPM 2016
Estimating Claim Liabilities - CAS RPM 2016Estimating Claim Liabilities - CAS RPM 2016
Estimating Claim Liabilities - CAS RPM 2016
 
valuation of financial assets financial tool.pptx
valuation of financial assets financial tool.pptxvaluation of financial assets financial tool.pptx
valuation of financial assets financial tool.pptx
 
Risky business: Guide to Risk Management
Risky business: Guide to Risk ManagementRisky business: Guide to Risk Management
Risky business: Guide to Risk Management
 
1. introduction basics of investments.ppt
1. introduction basics of investments.ppt1. introduction basics of investments.ppt
1. introduction basics of investments.ppt
 
Asset liability management
Asset liability managementAsset liability management
Asset liability management
 
AIBB 202 Lesson 2.6: CRG & Internal Credit Risk Rating Systems (ICRRS)
AIBB 202 Lesson 2.6: CRG & Internal Credit Risk Rating Systems (ICRRS)AIBB 202 Lesson 2.6: CRG & Internal Credit Risk Rating Systems (ICRRS)
AIBB 202 Lesson 2.6: CRG & Internal Credit Risk Rating Systems (ICRRS)
 
Invt Chapter 2 ppt.pptx best presentation
Invt Chapter 2 ppt.pptx best presentationInvt Chapter 2 ppt.pptx best presentation
Invt Chapter 2 ppt.pptx best presentation
 
BONDS
BONDSBONDS
BONDS
 
20 Reasons for Risk management updated 2023 intel document 15.docx
20 Reasons for Risk management updated 2023 intel document 15.docx20 Reasons for Risk management updated 2023 intel document 15.docx
20 Reasons for Risk management updated 2023 intel document 15.docx
 
BankRISK Presentation
BankRISK PresentationBankRISK Presentation
BankRISK Presentation
 
Bond Markert & Alternative Investment Ruls.ppt
Bond Markert & Alternative Investment Ruls.pptBond Markert & Alternative Investment Ruls.ppt
Bond Markert & Alternative Investment Ruls.ppt
 

More from av vedpuriswar

Operational Risk Management Oct 4
Operational Risk Management Oct 4Operational Risk Management Oct 4
Operational Risk Management Oct 4av vedpuriswar
 

More from av vedpuriswar (7)

Liquidity Risk Oct 4
Liquidity Risk Oct 4Liquidity Risk Oct 4
Liquidity Risk Oct 4
 
Greeks And Volatility
Greeks And VolatilityGreeks And Volatility
Greeks And Volatility
 
Operational Risk Management Oct 4
Operational Risk Management Oct 4Operational Risk Management Oct 4
Operational Risk Management Oct 4
 
Var Problems
Var ProblemsVar Problems
Var Problems
 
Value At Risk Sep 22
Value At Risk Sep 22Value At Risk Sep 22
Value At Risk Sep 22
 
Market Risk Modelling
Market Risk ModellingMarket Risk Modelling
Market Risk Modelling
 
Credit Derivatives
Credit DerivativesCredit Derivatives
Credit Derivatives
 

Recently uploaded

logistics industry development power point ppt.pdf
logistics industry development power point ppt.pdflogistics industry development power point ppt.pdf
logistics industry development power point ppt.pdfSalimullah13
 
Technology industry / Finnish economic outlook
Technology industry / Finnish economic outlookTechnology industry / Finnish economic outlook
Technology industry / Finnish economic outlookTechFinland
 
Famous No1 Amil Baba Love marriage Astrologer Specialist Expert In Pakistan a...
Famous No1 Amil Baba Love marriage Astrologer Specialist Expert In Pakistan a...Famous No1 Amil Baba Love marriage Astrologer Specialist Expert In Pakistan a...
Famous No1 Amil Baba Love marriage Astrologer Specialist Expert In Pakistan a...janibaber266
 
Seeman_Fiintouch_LLP_Newsletter_May-2024.pdf
Seeman_Fiintouch_LLP_Newsletter_May-2024.pdfSeeman_Fiintouch_LLP_Newsletter_May-2024.pdf
Seeman_Fiintouch_LLP_Newsletter_May-2024.pdfAshis Kumar Dey
 
Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. ...
Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. ...Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. ...
Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. ...rightmanforbloodline
 
cost-volume-profit analysis.ppt(managerial accounting).pptx
cost-volume-profit analysis.ppt(managerial accounting).pptxcost-volume-profit analysis.ppt(managerial accounting).pptx
cost-volume-profit analysis.ppt(managerial accounting).pptxazadalisthp2020i
 
Certified Kala Jadu, Black magic specialist in Rawalpindi and Bangali Amil ba...
Certified Kala Jadu, Black magic specialist in Rawalpindi and Bangali Amil ba...Certified Kala Jadu, Black magic specialist in Rawalpindi and Bangali Amil ba...
Certified Kala Jadu, Black magic specialist in Rawalpindi and Bangali Amil ba...batoole333
 
Premium Call Girls Bangalore Call Girls Service Just Call 🍑👄6378878445 🍑👄 Top...
Premium Call Girls Bangalore Call Girls Service Just Call 🍑👄6378878445 🍑👄 Top...Premium Call Girls Bangalore Call Girls Service Just Call 🍑👄6378878445 🍑👄 Top...
Premium Call Girls Bangalore Call Girls Service Just Call 🍑👄6378878445 🍑👄 Top...vershagrag
 
Dubai Call Girls Deira O525547819 Dubai Call Girls Bur Dubai Multiple
Dubai Call Girls Deira O525547819 Dubai Call Girls Bur Dubai MultipleDubai Call Girls Deira O525547819 Dubai Call Girls Bur Dubai Multiple
Dubai Call Girls Deira O525547819 Dubai Call Girls Bur Dubai Multiplekojalpk89
 
Lion One Corporate Presentation May 2024
Lion One Corporate Presentation May 2024Lion One Corporate Presentation May 2024
Lion One Corporate Presentation May 2024Adnet Communications
 
Business Principles, Tools, and Techniques in Participating in Various Types...
Business Principles, Tools, and Techniques in Participating in Various Types...Business Principles, Tools, and Techniques in Participating in Various Types...
Business Principles, Tools, and Techniques in Participating in Various Types...jeffreytingson
 
In Sharjah ௵(+971)558539980 *_௵abortion pills now available.
In Sharjah ௵(+971)558539980 *_௵abortion pills now available.In Sharjah ௵(+971)558539980 *_௵abortion pills now available.
In Sharjah ௵(+971)558539980 *_௵abortion pills now available.hyt3577
 
Thane Call Girls , 07506202331 Kalyan Call Girls
Thane Call Girls , 07506202331 Kalyan Call GirlsThane Call Girls , 07506202331 Kalyan Call Girls
Thane Call Girls , 07506202331 Kalyan Call GirlsPriya Reddy
 
Call Girls in Benson Town / 8250092165 Genuine Call girls with real Photos an...
Call Girls in Benson Town / 8250092165 Genuine Call girls with real Photos an...Call Girls in Benson Town / 8250092165 Genuine Call girls with real Photos an...
Call Girls in Benson Town / 8250092165 Genuine Call girls with real Photos an...kajal
 
Female Escorts Service in Hyderabad Starting with 5000/- for Savita Escorts S...
Female Escorts Service in Hyderabad Starting with 5000/- for Savita Escorts S...Female Escorts Service in Hyderabad Starting with 5000/- for Savita Escorts S...
Female Escorts Service in Hyderabad Starting with 5000/- for Savita Escorts S...kajalverma014
 
Benefits & Risk Of Stock Loans
Benefits & Risk Of Stock LoansBenefits & Risk Of Stock Loans
Benefits & Risk Of Stock LoansMartinRowse
 
Female Russian Escorts Mumbai Call Girls-((ANdheri))9833754194-Jogeshawri Fre...
Female Russian Escorts Mumbai Call Girls-((ANdheri))9833754194-Jogeshawri Fre...Female Russian Escorts Mumbai Call Girls-((ANdheri))9833754194-Jogeshawri Fre...
Female Russian Escorts Mumbai Call Girls-((ANdheri))9833754194-Jogeshawri Fre...priyasharma62062
 
Kurla Capable Call Girls ,07506202331, Sion Affordable Call Girls
Kurla Capable Call Girls ,07506202331, Sion Affordable Call GirlsKurla Capable Call Girls ,07506202331, Sion Affordable Call Girls
Kurla Capable Call Girls ,07506202331, Sion Affordable Call GirlsPriya Reddy
 
Collecting banker, Capacity of collecting Banker, conditions under section 13...
Collecting banker, Capacity of collecting Banker, conditions under section 13...Collecting banker, Capacity of collecting Banker, conditions under section 13...
Collecting banker, Capacity of collecting Banker, conditions under section 13...RaniT11
 

Recently uploaded (20)

logistics industry development power point ppt.pdf
logistics industry development power point ppt.pdflogistics industry development power point ppt.pdf
logistics industry development power point ppt.pdf
 
Technology industry / Finnish economic outlook
Technology industry / Finnish economic outlookTechnology industry / Finnish economic outlook
Technology industry / Finnish economic outlook
 
Famous No1 Amil Baba Love marriage Astrologer Specialist Expert In Pakistan a...
Famous No1 Amil Baba Love marriage Astrologer Specialist Expert In Pakistan a...Famous No1 Amil Baba Love marriage Astrologer Specialist Expert In Pakistan a...
Famous No1 Amil Baba Love marriage Astrologer Specialist Expert In Pakistan a...
 
Seeman_Fiintouch_LLP_Newsletter_May-2024.pdf
Seeman_Fiintouch_LLP_Newsletter_May-2024.pdfSeeman_Fiintouch_LLP_Newsletter_May-2024.pdf
Seeman_Fiintouch_LLP_Newsletter_May-2024.pdf
 
Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. ...
Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. ...Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. ...
Solution Manual For Financial Statement Analysis, 13th Edition By Charles H. ...
 
cost-volume-profit analysis.ppt(managerial accounting).pptx
cost-volume-profit analysis.ppt(managerial accounting).pptxcost-volume-profit analysis.ppt(managerial accounting).pptx
cost-volume-profit analysis.ppt(managerial accounting).pptx
 
Call Girls in Tilak Nagar (delhi) call me [🔝9953056974🔝] escort service 24X7
Call Girls in Tilak Nagar (delhi) call me [🔝9953056974🔝] escort service 24X7Call Girls in Tilak Nagar (delhi) call me [🔝9953056974🔝] escort service 24X7
Call Girls in Tilak Nagar (delhi) call me [🔝9953056974🔝] escort service 24X7
 
Certified Kala Jadu, Black magic specialist in Rawalpindi and Bangali Amil ba...
Certified Kala Jadu, Black magic specialist in Rawalpindi and Bangali Amil ba...Certified Kala Jadu, Black magic specialist in Rawalpindi and Bangali Amil ba...
Certified Kala Jadu, Black magic specialist in Rawalpindi and Bangali Amil ba...
 
Premium Call Girls Bangalore Call Girls Service Just Call 🍑👄6378878445 🍑👄 Top...
Premium Call Girls Bangalore Call Girls Service Just Call 🍑👄6378878445 🍑👄 Top...Premium Call Girls Bangalore Call Girls Service Just Call 🍑👄6378878445 🍑👄 Top...
Premium Call Girls Bangalore Call Girls Service Just Call 🍑👄6378878445 🍑👄 Top...
 
Dubai Call Girls Deira O525547819 Dubai Call Girls Bur Dubai Multiple
Dubai Call Girls Deira O525547819 Dubai Call Girls Bur Dubai MultipleDubai Call Girls Deira O525547819 Dubai Call Girls Bur Dubai Multiple
Dubai Call Girls Deira O525547819 Dubai Call Girls Bur Dubai Multiple
 
Lion One Corporate Presentation May 2024
Lion One Corporate Presentation May 2024Lion One Corporate Presentation May 2024
Lion One Corporate Presentation May 2024
 
Business Principles, Tools, and Techniques in Participating in Various Types...
Business Principles, Tools, and Techniques in Participating in Various Types...Business Principles, Tools, and Techniques in Participating in Various Types...
Business Principles, Tools, and Techniques in Participating in Various Types...
 
In Sharjah ௵(+971)558539980 *_௵abortion pills now available.
In Sharjah ௵(+971)558539980 *_௵abortion pills now available.In Sharjah ௵(+971)558539980 *_௵abortion pills now available.
In Sharjah ௵(+971)558539980 *_௵abortion pills now available.
 
Thane Call Girls , 07506202331 Kalyan Call Girls
Thane Call Girls , 07506202331 Kalyan Call GirlsThane Call Girls , 07506202331 Kalyan Call Girls
Thane Call Girls , 07506202331 Kalyan Call Girls
 
Call Girls in Benson Town / 8250092165 Genuine Call girls with real Photos an...
Call Girls in Benson Town / 8250092165 Genuine Call girls with real Photos an...Call Girls in Benson Town / 8250092165 Genuine Call girls with real Photos an...
Call Girls in Benson Town / 8250092165 Genuine Call girls with real Photos an...
 
Female Escorts Service in Hyderabad Starting with 5000/- for Savita Escorts S...
Female Escorts Service in Hyderabad Starting with 5000/- for Savita Escorts S...Female Escorts Service in Hyderabad Starting with 5000/- for Savita Escorts S...
Female Escorts Service in Hyderabad Starting with 5000/- for Savita Escorts S...
 
Benefits & Risk Of Stock Loans
Benefits & Risk Of Stock LoansBenefits & Risk Of Stock Loans
Benefits & Risk Of Stock Loans
 
Female Russian Escorts Mumbai Call Girls-((ANdheri))9833754194-Jogeshawri Fre...
Female Russian Escorts Mumbai Call Girls-((ANdheri))9833754194-Jogeshawri Fre...Female Russian Escorts Mumbai Call Girls-((ANdheri))9833754194-Jogeshawri Fre...
Female Russian Escorts Mumbai Call Girls-((ANdheri))9833754194-Jogeshawri Fre...
 
Kurla Capable Call Girls ,07506202331, Sion Affordable Call Girls
Kurla Capable Call Girls ,07506202331, Sion Affordable Call GirlsKurla Capable Call Girls ,07506202331, Sion Affordable Call Girls
Kurla Capable Call Girls ,07506202331, Sion Affordable Call Girls
 
Collecting banker, Capacity of collecting Banker, conditions under section 13...
Collecting banker, Capacity of collecting Banker, conditions under section 13...Collecting banker, Capacity of collecting Banker, conditions under section 13...
Collecting banker, Capacity of collecting Banker, conditions under section 13...
 

Credit Risk Management Primer

  • 1. Credit Risk Management Primer September 16, 2009 By A. V. Vedpuriswar
  • 2.
  • 3.
  • 4.
  • 5.
  • 6.
  • 7.
  • 8.
  • 9.
  • 10.
  • 11.
  • 12.
  • 13.
  • 14. Average cumulative default rates (%), 1970-2003 ( Source: Moody’s) Rating Term (Years) 1 2 3 4 5 7 10 15 20 Aaa 0.00 0.00 0.00 0.04 0.12 0.29 0.62 1.21 1.55 Aa 0.02 0.03 0.06 0.15 0.24 0.43 0.68 1.51 2.70 A 0.02 0.09 0.23 0.38 0.54 0.91 1.59 2.94 5.24 Baa 0.20 0.57 1.03 1.62 2.16 3.24 5.10 9.12 12.59 Ba 1.26 3.48 6.00 8.59 11.17 15.44 21.01 30.88 38.56 B 6.21 13.76 20.65 26.66 31.99 40.79 50.02 59.21 60.73 Caa 23.65 37.20 48.02 55.56 60.83 69.36 77.91 80.23 80.23
  • 15. Recovery rates on corporate bonds as a percent of face value, 1982-2004. ( Source : Moody’s). Class Average recovery rate (%) Senior secured 57.4 Senior unsecured 44.9 Senior subordinated 39.1 Subordinated 32.0 Junior subordinated 28.9
  • 16.
  • 17.
  • 18.
  • 19.
  • 20.
  • 21.
  • 22.
  • 23.
  • 24.
  • 25.
  • 26.
  • 27.
  • 28.
  • 29.
  • 30.
  • 31.
  • 32.
  • 33.
  • 34.
  • 35.
  • 36.
  • 37.
  • 38.
  • 39.
  • 40.
  • 41.
  • 42.
  • 43.
  • 44.
  • 45.
  • 46.
  • 47.
  • 48.
  • 49.
  • 50.
  • 51.
  • 52.
  • 53.
  • 54.
  • 55.