Download or read book Risk Topography written by Markus Brunnermeier and published by University of Chicago Press. This book was released on 2014-10-17 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent financial crisis and the difficulty of using mainstream macroeconomic models to accurately monitor and assess systemic risk have stimulated new analyses of how we measure economic activity and the development of more sophisticated models in which the financial sector plays a greater role. Markus Brunnermeier and Arvind Krishnamurthy have assembled contributions from leading academic researchers, central bankers, and other financial-market experts to explore the possibilities for advancing macroeconomic modeling in order to achieve more accurate economic measurement. Essays in this volume focus on the development of models capable of highlighting the vulnerabilities that leave the economy susceptible to adverse feedback loops and liquidity spirals. While these types of vulnerabilities have often been identified, they have not been consistently measured. In a financial world of increasing complexity and uncertainty, this volume is an invaluable resource for policymakers working to improve current measurement systems and for academics concerned with conceptualizing effective measurement.
Download or read book Portfolio Credit Risk and Macroeconomic Shocks written by Miguel A. Segoviano Basurto and published by International Monetary Fund. This book was released on 2006-12 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Portfolio credit risk measurement is greatly affected by data constraints, especially when focusing on loans given to unlisted firms. Standard methodologies adopt convenient, but not necessarily properly specified parametric distributions or simply ignore the effects of macroeconomic shocks on credit risk. Aiming to improve the measurement of portfolio credit risk, we propose the joint implementation of two new methodologies, namely the conditional probability of default (CoPoD) methodology and the consistent information multivariate density optimizing (CIMDO) methodology. CoPoD incorporates the effects of macroeconomic shocks into credit risk, recovering robust estimators when only short time series of loans exist. CIMDO recovers portfolio multivariate distributions (on which portfolio credit risk measurement relies) with improved specifications, when only partial information about borrowers is available. Implementation is straightforward and can be very useful in stress testing exercises (STEs), as illustrated by the STE carried out within the Danish Financial Sector Assessment Program.
Download or read book Advanced Credit Risk Analysis and Management written by Ciby Joseph and published by John Wiley & Sons. This book was released on 2013-04-22 with total page 454 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit is essential in the modern world and creates wealth, provided it is used wisely. The Global Credit Crisis during 2008/2009 has shown that sound understanding of underlying credit risk is crucial. If credit freezes, almost every activity in the economy is affected. The best way to utilize credit and get results is to understand credit risk. Advanced Credit Risk Analysis and Management helps the reader to understand the various nuances of credit risk. It discusses various techniques to measure, analyze and manage credit risk for both lenders and borrowers. The book begins by defining what credit is and its advantages and disadvantages, the causes of credit risk, a brief historical overview of credit risk analysis and the strategic importance of credit risk in institutions that rely on claims or debtors. The book then details various techniques to study the entity level credit risks, including portfolio level credit risks. Authored by a credit expert with two decades of experience in corporate finance and corporate credit risk, the book discusses the macroeconomic, industry and financial analysis for the study of credit risk. It covers credit risk grading and explains concepts including PD, EAD and LGD. It also highlights the distinction with equity risks and touches on credit risk pricing and the importance of credit risk in Basel Accords I, II and III. The two most common credit risks, project finance credit risk and working capital credit risk, are covered in detail with illustrations. The role of diversification and credit derivatives in credit portfolio management is considered. It also reflects on how the credit crisis develops in an economy by referring to the bubble formation. The book links with the 2008/2009 credit crisis and carries out an interesting discussion on how the credit crisis may have been avoided by following the fundamentals or principles of credit risk analysis and management. The book is essential for both lenders and borrowers. Containing case studies adapted from real life examples and exercises, this important text is practical, topical and challenging. It is useful for a wide spectrum of academics and practitioners in credit risk and anyone interested in commercial and corporate credit and related products.
Download or read book Essays on Macroeconomics and Credit Risk written by Sudarshan P. Gururaj and published by . This book was released on 2009 with total page 304 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essays on macroeconomics and credit risk.
Download or read book Portfolio Credit Risk and Macroeconomic Shocks written by Segoviano Basurto and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Nonperforming Loans in Sub Saharan Africa written by Hippolyte Fofack and published by World Bank Publications. This book was released on 2005 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper investigates the leading causes of nonperforming loans during the economic and banking crises that affected a large number of countries in Sub-Saharan Africa in the 1990s. Empirical analysis shows a dramatic increase in these loans and extremely high credit risk, with significant differences between the CFA and non-CFA countries, and substantially higher financial costs for the latter sub-panel of countries. The results also highlight a strong causality between these loans and economic growth, real exchange rate appreciation, the real interest rate, net interest margins, and interbank loans consistent with the causality and econometric analysis, which reveal the significance of macroeconomic and microeconomic factors. The dramatic increase in these loans is largely driven by macroeconomic volatility and reflects the vulnerability of undiversified African economies, which remain heavily exposed to external shocks. Simulated results show that macroeconomic stability and economic growth are associated with a declining level of nonperforming loans; whereas adverse macroeconomic shocks coupled with higher cost of capital and lower interest margins are associated with a rising scope of nonperforming loans. These results are supported by long-term estimates of nonperforming loans derived from pseudo panel-based prediction models. "--World Bank web site.
Download or read book The Credit Risk of Complex Derivatives written by Erik Banks and published by Springer. This book was released on 1997-05-14 with total page 397 pages. Available in PDF, EPUB and Kindle. Book excerpt: This edition of The Credit Risk of Complex Derivatives is fully updated and enhanced. It discusses and analyses the credit risks of the new financial derivatives. The book commences with an overview of the regulatory environment and the renewed emphasis on risk Management. It then provides a comprehensive review of complex options and swaps, with extensive examples and illustrations. The text concludes with a detailed discussion of portfolio credit risk issues and techniques in order to ensure the most effective and accurate understanding of complex derivative credit risk.
Download or read book Systemic Risks and the Macroeconomy written by Marcella Lucchetta and published by International Monetary Fund. This book was released on 2010-02-01 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a modeling framework that delivers joint forecasts of indicators of systemic real risk and systemic financial risk, as well as stress-tests of these indicators as impulse responses to structural shocks identified by standard macroeconomic and banking theory. This framework is implemented using large sets of quarterly time series of indicators of financial and real activity for the G-7 economies for the 1980Q1-2009Q3 period. We obtain two main results. First, there is evidence of out-of sample forecasting power for tail risk realizations of real activity for several countries, suggesting the usefulness of the model as a risk monitoring tool. Second, in all countries aggregate demand shocks are the main drivers of the real cycle, and bank credit demand shocks are the main drivers of the bank lending cycle. These results challenge the common wisdom that constraints in the aggregate supply of credit have been a key driver of the sharp downturn in real activity experienced by the G-7 economies in 2008Q4- 2009Q1.
Download or read book Quantitative Financial Risk Management written by Desheng Dash Wu and published by Springer Science & Business Media. This book was released on 2011-06-25 with total page 338 pages. Available in PDF, EPUB and Kindle. Book excerpt: The bulk of this volume deals with the four main aspects of risk management: market risk, credit risk, risk management - in macro-economy as well as within companies. It presents a number of approaches and case studies directed at applying risk management to diverse business environments. Included are traditional market and credit risk management models such as the Black-Scholes Option Pricing Model, the Vasicek Model, Factor models, CAPM models, GARCH models, KMV models and credit scoring models.
Download or read book Macroeconomics and Credit Risk written by M. Hashem Pesaran and published by . This book was released on 2006 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a new approach to modeling conditional credit loss distributions. Asset value changes of firms in a credit portfolio are linked to a dynamic global macroeconometric model, allowing macro effects to be isolated from idiosyncratic shocks from the perspective of default (and hence loss). Default probabilities are driven primarily by how firms are tied to business cycles, both domestic and foreign, and how business cycles are linked across countries. We allow for firm-specific business cycle effects and the heterogeneity of firm default thresholds using credit ratings. The model can be used, for example, to compute the effects of a hypothetical negative equity price shock in South East Asia on the loss distribution of a credit portfolio with global exposures over one or more quarters. We show that the effects of such shocks on losses are asymmetric and non-proportional, reflecting the highly non-linear nature of the credit risk model.
Download or read book The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions written by Jiri Podpiera and published by International Monetary Fund. This book was released on 2010-06-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper attempts to identify the fundamental variables that drive the credit default swaps during the initial phase of distress in selected European Large Complex Financial Institutions (LCFIs). It uses yearly data over 2004 - 08 for 29 European LCFIs. The results from a dynamic panel data estimator show that LCFIs’ business models, earnings potential, and economic uncertainty (represented by market expectations about the future risks of a particular LCFI and market views on prospects for economic growth) are among the most significant determinants of credit risk. The findings of the paper are broadly consistent with those of the literature on bank failure, where the determinants of the latter include the entire CAMELS structure - that is, Capital Adequacy, Asset Quality, Management Quality, Earnings Potential, Liquidity, and Sensitivity to Market Risk. By establishing a link between the financial and market fundamentals of LCFIs and their CDS spreads, the paper offers a potential tool for fundamentals-based vulnerability and early warning system for LCFIs.
Download or read book Credit Risk written by Darrell Duffie and published by Princeton University Press. This book was released on 2012-01-12 with total page 415 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this book, two of America's leading economists provide the first integrated treatment of the conceptual, practical, and empirical foundations for credit risk pricing and risk measurement. Masterfully applying theory to practice, Darrell Duffie and Kenneth Singleton model credit risk for the purpose of measuring portfolio risk and pricing defaultable bonds, credit derivatives, and other securities exposed to credit risk. The methodological rigor, scope, and sophistication of their state-of-the-art account is unparalleled, and its singularly in-depth treatment of pricing and credit derivatives further illuminates a problem that has drawn much attention in an era when financial institutions the world over are revising their credit management strategies. Duffie and Singleton offer critical assessments of alternative approaches to credit-risk modeling, while highlighting the strengths and weaknesses of current practice. Their approach blends in-depth discussions of the conceptual foundations of modeling with extensive analyses of the empirical properties of such credit-related time series as default probabilities, recoveries, ratings transitions, and yield spreads. Both the "structura" and "reduced-form" approaches to pricing defaultable securities are presented, and their comparative fits to historical data are assessed. The authors also provide a comprehensive treatment of the pricing of credit derivatives, including credit swaps, collateralized debt obligations, credit guarantees, lines of credit, and spread options. Not least, they describe certain enhancements to current pricing and management practices that, they argue, will better position financial institutions for future changes in the financial markets. Credit Risk is an indispensable resource for risk managers, traders or regulators dealing with financial products with a significant credit risk component, as well as for academic researchers and students.
Download or read book Macrofinancial Risk Analysis written by Dale Gray and published by John Wiley & Sons. This book was released on 2008-04-30 with total page 362 pages. Available in PDF, EPUB and Kindle. Book excerpt: Macrofinancial risk analysis Dale Gray and Samuel Malone Macrofinancial Risk Analysis provides a new and powerful framework with which policymakers and investors can analyze risk and vulnerability in economies, both emerging market and industrial. Using modern risk management and financial engineering techniques applied to the macroeconomy, an economic value can be placed on the risks posed by inter-linkages between sectors, the risk of default of different sectors on their outstanding debt obligations quantified, and the value ex-ante of guarantees to private sector entities by the government calculated. This book guides the reader through the basic macroeconomic and financial models necessary to understand the framework, the core analytical tools, and more advanced contributions that will be of interest to researchers. This unique synthesis of ideas from finance and macroeconomics offers several original contributions to the theory of financial crises, as well as a range of new policy options for governments interested in achieving a better tradeoff between economic growth and macro risk.
Download or read book Modeling Banking Sovereign and Macro Risk in a CCA Global VAR written by Mr.Dale F. Gray and published by International Monetary Fund. This book was released on 2013-10-23 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this paper is to develop a model framework for the analysis of interactions between banking sector risk, sovereign risk, corporate sector risk, real economic activity, and credit growth for 15 European countries and the United States. It is an integrated macroeconomic systemic risk model framework that draws on the advantages of forward-looking contingent claims analysis (CCA) risk indicators for the banking systems in each country, forward-looking CCA risk indicators for sovereigns, and a GVAR model to combine the banking, the sovereign, and the macro sphere. The CCA indicators capture the nonlinearity of changes in bank assets, equity capital, credit spreads, and default probabilities. They capture the expected losses, spreads and default probability for sovereigns. Key to the framework is that sovereign credit spreads, banking system credit risk, corporate sector credit risk, economic growth, and credit variables are combined in a fully endogenous setting. Upon estimation and calibration of the global model, we simulate various negative and positive shock scenarios, particularly to bank and sovereign risk. The goal is to use this framework to analyze the impact and spillover of shocks and to help identify policies that would mitigate banking system, sovereign credit risk and recession risk—policies including bank capital increases, purchase of sovereign debt, and guarantees.
Download or read book Quantitative Financial Risk Management written by Desheng Dash Wu and published by Springer. This book was released on 2011-07-02 with total page 338 pages. Available in PDF, EPUB and Kindle. Book excerpt: The bulk of this volume deals with the four main aspects of risk management: market risk, credit risk, risk management - in macro-economy as well as within companies. It presents a number of approaches and case studies directed at applying risk management to diverse business environments. Included are traditional market and credit risk management models such as the Black-Scholes Option Pricing Model, the Vasicek Model, Factor models, CAPM models, GARCH models, KMV models and credit scoring models.
Download or read book Risk Taking and Interest Rates written by Seung Jung Lee and published by International Monetary Fund. This book was released on 2017-02-10 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study how low interest rates in the United States affect risk taking in the market of crossborder leveraged corporate loans. To the extent that actions of the Federal Reserve affect U.S. interest rates, our analysis provides evidence of a cross-border spillover effect of monetary policy. We find that before the crisis, lenders made ex-ante riskier loans to non- U.S. borrowers in response to a decline in short-term U.S. interest rates, and, after it, in response to a decline in longer-term U.S. interest rates. Economic uncertainty and risk appetite appear to play a limited role in explaining ex-ante credit risk. Our results highlight the potential policy challenges faced by central banks in affecting credit risk cycles in their own jurisdictions.
Download or read book Macroeconomic Dynamics and Credit Risk written by M. Hashem Pesaran and published by . This book was released on 2003 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt:
