Credit risk management

1. Example Index
Copyright 2018 CapitaLogic Limited
Example Description Excel technique
1 Risk tolerance level
2 Global markets monitor
This Excel workbook is prepared in accordance with
Chapter 5 of the text book
"Managing Credit Risk Under The Basel III Framework, 3
rd
ed"
Authored by :Dr. LAM Yat-fai (林日辉)
Principal, Structured Products Analytics, CapitaLogic Limited
Adjunct Professor of Finance, City University of Hong Kong
Doctor of Business Administration
CFA, CAIA, CAMS, FRM, PRM
Website: https://sites.google.com/site/crmbase
E-mail: crmbasel@gmail.com
Copyright 2018 CapitaLogic Limited

2. Example 1. Risk tolerance level
Debt EAD LGD Default loss PD RM Default chance EL
1 99,226 64.68% 64,179 0.11% 0.32 0.04% 23
2 121,793 55.47% 67,559 0.50% 3.35 1.67% 1,125
3 108,530 54.51% 59,160 7.41% 0.16 1.22% 724
4 83,405 56.40% 47,040 2.13% 1.51 3.20% 1,505
5 76,637 52.61% 40,319 0.01% 3.29 0.03% 13
6 108,033 48.70% 52,612 1.21% 4.87 5.76% 3,029
7 119,043 61.23% 72,890 1.05% 0.37 0.39% 284
8 99,985 67.70% 67,690 0.87% 0.48 0.42% 283
9 105,900 74.40% 78,790 2.15% 1.89 4.02% 3,171
10 70,423 64.49% 45,416 4.59% 4.51 19.10% 8,673
11 110,235 54.11% 59,648 9.75% 4.98 40.00% 23,861
12 106,290 56.92% 60,500 6.11% 0.36 2.24% 1,358
13 66,627 54.43% 36,265 4.92% 4.04 18.44% 6,687
14 74,849 56.72% 42,454 3.90% 2.13 8.12% 3,449
15 85,565 58.46% 50,021 1.97% 1.67 3.27% 1,635
16 71,209 51.24% 36,487 1.39% 2.77 3.80% 1,388
17 68,684 61.70% 42,378 4.30% 1.85 7.81% 3,309
18 113,894 66.17% 75,364 4.09% 2.52 9.99% 7,528
19 119,584 74.74% 89,377 4.56% 2.21 9.80% 8,759
20 97,455 78.37% 76,375 9.09% 0.69 6.36% 4,861
21 115,295 70.33% 81,087 12.13% 0.55 6.87% 5,567
22 133,704 59.59% 79,674 15.89% 3.88 48.90% 38,962
23 112,362 41.50% 46,630 8.57% 3.77 28.66% 13,366
24 113,837 44.03% 50,122 6.17% 0.33 2.08% 1,042
25 103,345 44.98% 46,485 6.53% 4.95 28.41% 13,208
26 110,189 44.94% 49,519 11.57% 4.45 42.14% 20,868
27 95,081 66.15% 62,896 7.57% 1.77 13.01% 8,180
28 113,305 66.07% 74,861 6.82% 4.37 26.56% 19,882
29 116,042 48.92% 56,768 6.45% 1.85 11.60% 6,588
30 79,473 54.37% 43,209 2.33% 3.05 6.94% 2,998
Copyright 2018 CapitaLogic Limited

3. Example 2 GMM
(A) Market monitoring factors
Currency
rate 1-year 5-year 10-year Market Volatility Date 10 Oct 2008
HKD 0 0.1 0.05 0.01 0.01 HSI Week 221
CNY 0 0.05 0.01 0.01 0.01 China SSE Emergency (+1%) 19
JPY 0.01 0 0 0.01 0.01 0.01 Nikkei 225 Warning (+5%) 5
USD 0 0 0 0 0.01 0.01 S&P 500 Attention (+10%) 2
GBP 0.05 0.05 0 0 0.01 0.01 FTSE Normal 13
EUR 0.1 0 0 0.05 0.01 0.01 DAX Exception 26
0.01 0 0.01 0.01 0.01 CAC 40 Percentage 66.67%
Gold Oil SiFi
Caplofic
Total 3 3 2 5 7 6 26
(B) Trend
07 S
31 A
24 A
17 A
10 A
03 A
27
20
13
06
29 J
22 J
15 J
08 J
01 J
25 M
18 M
Commodity price
SummaryZero treasury rate Equity index
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jul2008
Jul2008
Jul2008
Aug2008
Aug2008
Aug2008
Aug2008
Aug2008
Sep2008
Sep2008
Sep2008
Sep2008
Oct2008
Oct2008
Copyright 2018 CapitaLogic Limited