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

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 Primer
av 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 measures
crmbasel
 
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 banks
WriteKraft 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 Primer
av 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 measures
crmbasel
 
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 banks
WriteKraft 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 Management
Maryum 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 Primer
av 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 Management
Farouk Nasser
 
Credit risk management
Credit risk managementCredit risk management
Credit risk managementazmatmengal
 
Credit risk management
Credit risk managementCredit risk management
Credit risk management
Gokul K Prasad
 
Credit Management Practices of BDBL
Credit Management Practices of BDBLCredit Management Practices of BDBL
Credit Management Practices of BDBL
Khan 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 management
kamakshi 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 Management
Colleen Beck-Domanico
 
Introduction to credit risk management
Introduction to credit risk managementIntroduction to credit risk management
Introduction to credit risk management
TOSHI STATS Co.,Ltd.
 
Jntu credit risk-management
Jntu credit risk-managementJntu credit risk-management
Jntu credit risk-management
ShivaLeela 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 University
Swaminath Sam
 
Credit Risk Management Problems
Credit Risk Management ProblemsCredit Risk Management Problems
Credit Risk Management Problems
av vedpuriswar
 
Credit Risk Management
Credit Risk ManagementCredit Risk Management
Credit Risk Management
Abdul 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

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 Management
Maryum 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 Primer
av 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 Management
Farouk Nasser
 
Credit risk management
Credit risk managementCredit risk management
Credit risk managementazmatmengal
 
Credit risk management
Credit risk managementCredit risk management
Credit risk management
Gokul K Prasad
 
Credit Management Practices of BDBL
Credit Management Practices of BDBLCredit Management Practices of BDBL
Credit Management Practices of BDBL
Khan 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 management
kamakshi 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 Management
Colleen Beck-Domanico
 
Introduction to credit risk management
Introduction to credit risk managementIntroduction to credit risk management
Introduction to credit risk management
TOSHI STATS Co.,Ltd.
 
Jntu credit risk-management
Jntu credit risk-managementJntu credit risk-management
Jntu credit risk-management
ShivaLeela 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 University
Swaminath Sam
 
Credit Risk Management Problems
Credit Risk Management ProblemsCredit Risk Management Problems
Credit Risk Management Problems
av 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 Management
Abdul 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 ppt
Sneha Salian
 
Credit risk management presentation
Credit risk management presentationCredit risk management presentation
Credit risk management presentation
harsh 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

The low return of high yield
The low return of high yieldThe low return of high yield
The low return of high yield
Guillermo Roditi Dominguez
 
13.11.2008 Alm Jan 2008
13.11.2008 Alm Jan 200813.11.2008 Alm Jan 2008
13.11.2008 Alm Jan 2008deepakumari
 
Introduction to Interest Rrate Risk Management
Introduction to Interest Rrate Risk ManagementIntroduction to Interest Rrate Risk Management
Introduction to Interest Rrate Risk Management
Mohamed Farouk, CFA, CFTe I
 
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
 
Lecture004.pdf
Lecture004.pdfLecture004.pdf
Lecture004.pdf
kashifali433134
 
How does the math work
How does the math workHow does the math work
How does the math work
Brooke Clark
 
Drsk bloomberg deafult risk
Drsk bloomberg deafult riskDrsk bloomberg deafult risk
Drsk bloomberg deafult risk
denurpramana
 
Cas rpm 2015 claim liability estimation
Cas rpm 2015 claim liability estimationCas rpm 2015 claim liability estimation
Cas rpm 2015 claim liability estimation
Alejandro Ortega
 
Estimating Claim Liabilities - CAS RPM 2016
Estimating Claim Liabilities - CAS RPM 2016Estimating Claim Liabilities - CAS RPM 2016
Estimating Claim Liabilities - CAS RPM 2016
Alejandro 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.pptx
andrekuncoro1
 
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.ppt
Navneet 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 presentation
Kalkaye
 
BONDS
BONDSBONDS
BONDS
CHARAK RAY
 
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
intel-writers.com
 
BankRISK Presentation
BankRISK PresentationBankRISK Presentation
BankRISK Presentation
TriNovus LLC
 
Bond Markert & Alternative Investment Ruls.ppt
Bond Markert & Alternative Investment Ruls.pptBond Markert & Alternative Investment Ruls.ppt
Bond Markert & Alternative Investment Ruls.ppt
MuhammadWaliUllah10
 

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
 
Var Problems
Var ProblemsVar Problems
Var Problems
av vedpuriswar
 
Value At Risk Sep 22
Value At Risk Sep 22Value At Risk Sep 22
Value At Risk Sep 22
av vedpuriswar
 
Market Risk Modelling
Market Risk ModellingMarket Risk Modelling
Market Risk Modelling
av vedpuriswar
 
Credit Derivatives
Credit DerivativesCredit Derivatives
Credit Derivatives
av 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

Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...
Quotidiano Piemontese
 
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...
Vighnesh Shashtri
 
Intro_Economics_ GPresentation Week 4.pptx
Intro_Economics_ GPresentation Week 4.pptxIntro_Economics_ GPresentation Week 4.pptx
Intro_Economics_ GPresentation Week 4.pptx
shetivia
 
APP I Lecture Notes to students 0f 4the year
APP I Lecture Notes to students 0f 4the yearAPP I Lecture Notes to students 0f 4the year
APP I Lecture Notes to students 0f 4the year
telilaalilemlem
 
PF-Wagner's Theory of Public Expenditure.pptx
PF-Wagner's Theory of Public Expenditure.pptxPF-Wagner's Theory of Public Expenditure.pptx
PF-Wagner's Theory of Public Expenditure.pptx
GunjanSharma28848
 
The new type of smart, sustainable entrepreneurship and the next day | Europe...
The new type of smart, sustainable entrepreneurship and the next day | Europe...The new type of smart, sustainable entrepreneurship and the next day | Europe...
The new type of smart, sustainable entrepreneurship and the next day | Europe...
Antonis Zairis
 
234Presentation on Indian Debt Market.ppt
234Presentation on Indian Debt Market.ppt234Presentation on Indian Debt Market.ppt
234Presentation on Indian Debt Market.ppt
PravinPatil144525
 
how can i use my minded pi coins I need some funds.
how can i use my minded pi coins I need some funds.how can i use my minded pi coins I need some funds.
how can i use my minded pi coins I need some funds.
DOT TECH
 
The WhatsPump Pseudonym Problem and the Hilarious Downfall of Artificial Enga...
The WhatsPump Pseudonym Problem and the Hilarious Downfall of Artificial Enga...The WhatsPump Pseudonym Problem and the Hilarious Downfall of Artificial Enga...
The WhatsPump Pseudonym Problem and the Hilarious Downfall of Artificial Enga...
muslimdavidovich670
 
Isios-2024-Professional-Independent-Trustee-Survey.pdf
Isios-2024-Professional-Independent-Trustee-Survey.pdfIsios-2024-Professional-Independent-Trustee-Survey.pdf
Isios-2024-Professional-Independent-Trustee-Survey.pdf
Henry Tapper
 
how to sell pi coins on Binance exchange
how to sell pi coins on Binance exchangehow to sell pi coins on Binance exchange
how to sell pi coins on Binance exchange
DOT TECH
 
managementaccountingunitiv-230422140105-dd17d80b.ppt
managementaccountingunitiv-230422140105-dd17d80b.pptmanagementaccountingunitiv-230422140105-dd17d80b.ppt
managementaccountingunitiv-230422140105-dd17d80b.ppt
SuseelaPalanimuthu
 
How to get verified on Coinbase Account?_.docx
How to get verified on Coinbase Account?_.docxHow to get verified on Coinbase Account?_.docx
How to get verified on Coinbase Account?_.docx
Buy bitget
 
when will pi network coin be available on crypto exchange.
when will pi network coin be available on crypto exchange.when will pi network coin be available on crypto exchange.
when will pi network coin be available on crypto exchange.
DOT TECH
 
where can I find a legit pi merchant online
where can I find a legit pi merchant onlinewhere can I find a legit pi merchant online
where can I find a legit pi merchant online
DOT TECH
 
what is a pi whale and how to access one.
what is a pi whale and how to access one.what is a pi whale and how to access one.
what is a pi whale and how to access one.
DOT TECH
 
USDA Loans in California: A Comprehensive Overview.pptx
USDA Loans in California: A Comprehensive Overview.pptxUSDA Loans in California: A Comprehensive Overview.pptx
USDA Loans in California: A Comprehensive Overview.pptx
marketing367770
 
how to sell pi coins on Bitmart crypto exchange
how to sell pi coins on Bitmart crypto exchangehow to sell pi coins on Bitmart crypto exchange
how to sell pi coins on Bitmart crypto exchange
DOT TECH
 
Introduction to Value Added Tax System.ppt
Introduction to Value Added Tax System.pptIntroduction to Value Added Tax System.ppt
Introduction to Value Added Tax System.ppt
VishnuVenugopal84
 
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
Falcon Invoice Discounting
 

Recently uploaded (20)

Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...
 
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...
 
Intro_Economics_ GPresentation Week 4.pptx
Intro_Economics_ GPresentation Week 4.pptxIntro_Economics_ GPresentation Week 4.pptx
Intro_Economics_ GPresentation Week 4.pptx
 
APP I Lecture Notes to students 0f 4the year
APP I Lecture Notes to students 0f 4the yearAPP I Lecture Notes to students 0f 4the year
APP I Lecture Notes to students 0f 4the year
 
PF-Wagner's Theory of Public Expenditure.pptx
PF-Wagner's Theory of Public Expenditure.pptxPF-Wagner's Theory of Public Expenditure.pptx
PF-Wagner's Theory of Public Expenditure.pptx
 
The new type of smart, sustainable entrepreneurship and the next day | Europe...
The new type of smart, sustainable entrepreneurship and the next day | Europe...The new type of smart, sustainable entrepreneurship and the next day | Europe...
The new type of smart, sustainable entrepreneurship and the next day | Europe...
 
234Presentation on Indian Debt Market.ppt
234Presentation on Indian Debt Market.ppt234Presentation on Indian Debt Market.ppt
234Presentation on Indian Debt Market.ppt
 
how can i use my minded pi coins I need some funds.
how can i use my minded pi coins I need some funds.how can i use my minded pi coins I need some funds.
how can i use my minded pi coins I need some funds.
 
The WhatsPump Pseudonym Problem and the Hilarious Downfall of Artificial Enga...
The WhatsPump Pseudonym Problem and the Hilarious Downfall of Artificial Enga...The WhatsPump Pseudonym Problem and the Hilarious Downfall of Artificial Enga...
The WhatsPump Pseudonym Problem and the Hilarious Downfall of Artificial Enga...
 
Isios-2024-Professional-Independent-Trustee-Survey.pdf
Isios-2024-Professional-Independent-Trustee-Survey.pdfIsios-2024-Professional-Independent-Trustee-Survey.pdf
Isios-2024-Professional-Independent-Trustee-Survey.pdf
 
how to sell pi coins on Binance exchange
how to sell pi coins on Binance exchangehow to sell pi coins on Binance exchange
how to sell pi coins on Binance exchange
 
managementaccountingunitiv-230422140105-dd17d80b.ppt
managementaccountingunitiv-230422140105-dd17d80b.pptmanagementaccountingunitiv-230422140105-dd17d80b.ppt
managementaccountingunitiv-230422140105-dd17d80b.ppt
 
How to get verified on Coinbase Account?_.docx
How to get verified on Coinbase Account?_.docxHow to get verified on Coinbase Account?_.docx
How to get verified on Coinbase Account?_.docx
 
when will pi network coin be available on crypto exchange.
when will pi network coin be available on crypto exchange.when will pi network coin be available on crypto exchange.
when will pi network coin be available on crypto exchange.
 
where can I find a legit pi merchant online
where can I find a legit pi merchant onlinewhere can I find a legit pi merchant online
where can I find a legit pi merchant online
 
what is a pi whale and how to access one.
what is a pi whale and how to access one.what is a pi whale and how to access one.
what is a pi whale and how to access one.
 
USDA Loans in California: A Comprehensive Overview.pptx
USDA Loans in California: A Comprehensive Overview.pptxUSDA Loans in California: A Comprehensive Overview.pptx
USDA Loans in California: A Comprehensive Overview.pptx
 
how to sell pi coins on Bitmart crypto exchange
how to sell pi coins on Bitmart crypto exchangehow to sell pi coins on Bitmart crypto exchange
how to sell pi coins on Bitmart crypto exchange
 
Introduction to Value Added Tax System.ppt
Introduction to Value Added Tax System.pptIntroduction to Value Added Tax System.ppt
Introduction to Value Added Tax System.ppt
 
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
 

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.