A guide to active credit portfolio management: spotlight on illiquid credit risks
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| Format: | Book |
|---|---|
| Language: | English |
| Published: |
London
Risk Books
2008
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| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | XX, 339 S. graph. Darst. |
| ISBN: | 9781906348083 1906348081 |
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MARC
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| 245 | 1 | 0 | |a A guide to active credit portfolio management |b spotlight on illiquid credit risks |c ed. by Stefan Benvegnù ... |
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Record in the Search Index
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| adam_text | Titel: A guide to active credit portfolio management
Autor: Benvegnù, Stefan
Jahr: 2008
Contents
List of Figures vii
List of Tables xi
Foreword xiii
Preface xv
About the Authors xix
An Introduction to Active Credit Portfolio Management 1
1.1 Motivation and Value Levers of ACPM 1
1.2 Mandate, Roles and Organisation of ACPM 7
1.3 Tools and Instruments of ACPM 18
1.4 Challenges in ACPM 26
Mathematical Modelling in Credit Portfolio Management 29
2.1 Single-Name Credit Risk Measurement 30
2.2 Modelling Portfolio Loss 48
2.3 Portfolio and Facility Risk Measures 57
2.4 One Step Beyond the Normal World 64
2.5 Modelling Nth-to-Default Baskets 75
Example Calculations 85
3.1 Example Model 85
3.2 Example Portfolio 96
3.3 Portfolio Steering 103
Performance Benchmarking in Credit Portfolio Management 111
4.1 Return on Regulatory and Economic Capital 111
4.2 Portfolio Benchmarking 117
4.3 Business Case Analysis and Economic Benchmarking 121
Active Management of Credit Risk Short Positions 131
5.1 introduction 131
5.2 Hedging Single-Name Credit Risk 139
5.3 Hedging with Portfolio-Referenced Correlation Products 170
Active Management of Credit Risk Long Positions 241
6.1 Introduction 241
6.2 Evaluation of Single-Name Credit Risk 247
6.3 Evaluation of Structured Credit Portfolios: Reinvestment in
CMBS Tranches 258
A GUIDE TO ACTIVE CREDIT PORTFOLIO MANAGEMENT
7 Case Study: CLOCK Finance No. 1 (CLO, March 2007) 265
7.1 Motivation and Benefits 265
7.2 Transaction Characteristics 267
7.3 Business Case 288
7.4 Reference Portfolio Characteristics 295
7.5 Project Overview 299
8 Cost-to-Securitise: Transfer Pricing of Illiquid Credit Risks 321
8.1 Basic Concept 323
8.2 CLO Sample Portfolio and Dependency on Market
Conditions 329
Index 337
VI
List of Figures
1.1 Loss distribution of credit portfolios 2
1.2 Portfolio analysis and evaluation 8
1.3 The economic cycle, business intuition, and lessons from the
past 10
1.4 ACPM evolution chain 13
1.5 Mandates and organisation of ACPM units 15
1.6 Mandate chart for the ACPM unit of Credit Suisse in
Switzerland 16
1.7 Risk-adjusted pricing 19
1.8 Overview of hedging instruments 20
1.9 Assessment scheme for a hedging decision 23
1.10 Examples for investment case assessments 24
1.11 Illustration of short-long position steering 25
2.1 Example of an ROC curve 40
2.2 Illustration of AUROC mechanics 40
2.3 Example for a rating development process as deployed in
Credit Suisse 42
2.4 Illustration of drawdown factors 44
2.5 Example of the calculation of drawdown factors 45
2.6 Illustration of cash exposure equivalency factors 46
2.7 Example of the calculation of CEEFs (here we look at
guarantees) 47
2.8 Possible model of one scenario of default modelling 51
2.9 Tranche reference loss 62
2.10 Qualitative tail behaviour of the three large homogeneous pool
loss distributions 74
2.11 FTD and STD probabilities of a duo basket as a function of the
default correlation (PDi = 0.02, PD2 = 0.01) 79
3.1 The correlation matrix of the systematic factors calibrated
through MSCI equity indexes data 89
3.2 Continuous PD term structures (solid lines) for up to 10
years generated by the NHCTMC approach using Moody s
empirical average corporate migration rates and default
frequencies (displayed by crosses in the plots) 95
3.3 EAD distributions for the example portfolio by regions and
business units 98
VII
A GUIDE TO ACTIVE CREDIT PORTFOLIO MANAGEMENT
3.4 EAD distributions for the example portfolio by main global
industries and the frequency of the largest single exposure
positions, which are around 1% of the total portfolio EAD 99
3.5 Rating distributions for the example portfolio by region and
business units 100
3.6 Distributions of LGD of EAD for the example portfolio by
regions and business units 101
3.7 Different LGD distributions for the example portfolio in
Europe, the Americas and Asia 102
3.8 The one- and five-year shortfall capital of the banking portfolio
by business division (group level) 104
3.9 The five-year shortfall capital by business division and region 105
3.10 Sorting of risk measures 106
3.11 Ratio between ESC and EL 107
4.1 Derivation and components of EVA 116
4.2 Risk-return benchmarking of portfolios 118
4.3 RAROC benchmarking of portfolios 119
4.4 RAROC benchmarking 121
4.5 Business case components 123
4.6 Schematic NPV calculation 125
4.7 Business case with risk capital view 127
4.8 Breakeven analysis with risk capital view 128
5.1 Front-end versus back-end steering 132
5.2 Overview of risk transfer instruments 133
5.3 Client segments and risk transfer instruments 134
5.4 Example of mark-to-market volatility 139
5.5 Traditional instruments of credit risk transfer 142
5.6 Basic concept of a CDS 144
5.7 CDS settlement upon credit event 145
5.8 Design of a credit risk transfer proposal 147
5.9 Risk transfer of XY-Inc: basic setting 150
5.10 CDS characteristics 152
5.11 Impact analysis: economic view 160
5.12 Impact analysis: regulatory view 162
5.13 Portfolio effect on GM portfolio 163
5.14 Portfolio effect on example bank credit portfolio 164
5.15 Portfolio effect on banking divisions 164
5.16 Mechanics of an EDS 166
5.17 Effect of FTD, STD and full CDS hedges on ESC contributions
allocated to the bank s business units 175
5.18 Effect of FTD, STD and full CDS hedges on EL contributions
allocated to the bank s business units 176
5.19 Overview of asset-backed structures 179
5.20 European ABS issuance 1999-2007 by asset class 181
viii
LIST OF FIGURES
5.21 Fully funded true sale structure 181
5.22 Partially funded true sale structure 182
5.23 European RMBS issuance 1999-2007 by country 185
5.24 RMBS impact with all tranches sold 200
5.25 RMBS impact with equity tranche retained 200
5.26 European CLO issuance 1999-2007 202
5.27 Possible transaction structures 208
5.28 Dynamic delinquency development 213
5.29 Static default development over time 214
5.30 CLO impact with all tranches sold 219
5.31 CLO impact with AAA tranche retained 219
5.32 Historical CMBS issuance (US$bn) 222
5.33 CMBS market participants by investor type 2006 222
5.34 Steps of the securitisation process 223
5.35 Main collateral pool characteristics of Cornerstone TITAN
2007-1 228
5.36 Loan maturities of Cornerstone TITAN 20O7-1 229
5.37 Potential structure and involved parties 230
5.38 European CMBS five-year AAA to BBB spreads: historical and
current levels 232
6.1 Investment process 246
6.2 Overview of the loan origination process 247
6.3 Protection buying versus protection selling 251
6.4 Steering of single-name risk 253
7.1 CLO spread overview 266
7.2 CLOCK Finance No. 1: transaction structure 269
7.3 Illustrative stochastic impact analysis of CLOCK Finance No. 1
on the P L distribution 294
7.4 CLOCK rating distribution over time 297
7.5 Project overview 300
7.6 Structuring process 303
7.7 Transaction servicing 313
7.8 Treatment of credit events 316
8.1 Credit valuation landscape 323
8.2 Basic concept of CTS 324
8.3 Loss paths 325
8.4 Tranche EL contributions for SLGD levels 330
8.5 Tranche EL contributions for PD levels 331
8.6 One-year history of iTraxx Europe Series 3 for three, five and
seven years of maturity 333
8.7 The TEL,,t for three facilities with different risk characteristics
are shown as well as the corresponding PDs and SLGDs 334
IX
List of Tables
2.1 Example rating bands, their rating classes and corresponding
median PDs 33
3.1 MSCI equity indexes used as proxies for systematic factors in
example factor model 87
3.2 The R2 (%) for the example portfolio model, obtained by the
homogeneous attribute bucket R2 method (rounded to 5%) 92
3.3 One-year migration matrix based on Moody s average
one-year migration matrix for corporations 93
3.4 Best-fit a- and ^-vectors 94
3.5 Moody s one-year PDs and rating bands 97
3.6 Top 10 exposure list for the example portfolio 100
3.7 Rating the bank s portfolio 108
4.1 Performance measures in overview 112
5.1 The main criteria for determining hedge effectiveness 153
5.2 Hedge effectiveness: economic view 154
5.3 Hedge effectiveness: regulatory view 156
5.4 Comparison between EDSs and CDSs 167
5.5 Quoted spreads of a sample of reference units making up a
basket 172
5.6 Basket constituents for the FTD and STD basket hedges 174
5.7 RMBS tranche structure 199
5.8 Different characteristics for SME and large-cap CLOs 205
5.9 Illustration of dynamic pool data 211
5.10 Illustration of static pool data 213
5.11 Illustration of loan-by-loan default data 215
5.12 CLO tranche structure 218
5.13 Typical CMBS loan features 227
5.14 Key collateral pool characteristics of Cornerstone TITAN 2007-1 228
5.15 Main parties involved in Cornerstone TITAN 2007-1 230
5.16 Tranching of Cornerstone TITAN 2007-1 231
5.17 Sample CMBS collateral pool of five-year fixed-rate mortgages 233
5.18 Sample CMBS tranching structure 234
5.19 Sample CMBS overall profit expectation 235
6.1 Overview of reference entities for protection buying 254
6.2 Overview of reference entities for protection selling 255
6.3 Impact on expected loss and shortfall capital 255
XI
A CUIDE TO ACTIVE CREDIT PORTFOLIO MANAGEMENT
6.4 Overview of reference entities for protection selling transaction 256
6.5 Impact on regulatory-capital-based risk measures 256
6.6 Impact on economic-capital-based risk measures 257
6.7 Sample traditional commercial real estate loan characteristics 259
6.8 Bank s assumed risk appetite 260
6.9 Sample CMBS loan characteristics 260
6.10 Bank s reinvestment opportunities 261
6.11 IRR distribution of bank s reinvestment decision 261
6.12 CMBS tranche assessment 263
7.1 CLOCK Finance No. 1: transaction tranching 272
7.2 Main parties involved in CLOCK Finance No. 1 274
7.3 Maximum concentration per internal rating class 279
7.4 Illustrative calculation of risk reduction benefit 289
7.5 Tranche risk weights for ratings-based approach under Basel II 291
7.6 CLOCK Finance No. 1 portfolio characteristics 295
7.7 Distribution by Fitch industry sector 296
7.8 Distribution by CR rating 297
7.9 Distribution of reference entity by reference entity notional
amounts 298
7.10 Distribution of reference entity group by reference entity
notional amounts 298
7.11 Distribution by LGD 299
7.12 Distribution by region 299
8.1 Three tranche spreads as well as the respective costs are given
for each of three different hypothetical market conditions 332
8.2 Examples for iTraxx Europe Series 7 with five years maturity 333
8.3 Results for the sample CLO calculation 335
XII
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| spelling | A guide to active credit portfolio management spotlight on illiquid credit risks ed. by Stefan Benvegnù ... London Risk Books 2008 XX, 339 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Credit Management Portfolio management Kreditrisiko (DE-588)4114309-7 gnd rswk-swf Liquidität (DE-588)4035908-6 gnd rswk-swf Portfoliomanagement (DE-588)4115601-8 gnd rswk-swf Risikomanagement (DE-588)4121590-4 gnd rswk-swf Kreditrisiko (DE-588)4114309-7 s Portfoliomanagement (DE-588)4115601-8 s Liquidität (DE-588)4035908-6 s Risikomanagement (DE-588)4121590-4 s DE-604 Benvegnú, Stefan Sonstige oth HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=020219501&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | A guide to active credit portfolio management spotlight on illiquid credit risks Credit Management Portfolio management Kreditrisiko (DE-588)4114309-7 gnd Liquidität (DE-588)4035908-6 gnd Portfoliomanagement (DE-588)4115601-8 gnd Risikomanagement (DE-588)4121590-4 gnd |
| subject_GND | (DE-588)4114309-7 (DE-588)4035908-6 (DE-588)4115601-8 (DE-588)4121590-4 |
| title | A guide to active credit portfolio management spotlight on illiquid credit risks |
| title_auth | A guide to active credit portfolio management spotlight on illiquid credit risks |
| title_exact_search | A guide to active credit portfolio management spotlight on illiquid credit risks |
| title_full | A guide to active credit portfolio management spotlight on illiquid credit risks ed. by Stefan Benvegnù ... |
| title_fullStr | A guide to active credit portfolio management spotlight on illiquid credit risks ed. by Stefan Benvegnù ... |
| title_full_unstemmed | A guide to active credit portfolio management spotlight on illiquid credit risks ed. by Stefan Benvegnù ... |
| title_short | A guide to active credit portfolio management |
| title_sort | a guide to active credit portfolio management spotlight on illiquid credit risks |
| title_sub | spotlight on illiquid credit risks |
| topic | Credit Management Portfolio management Kreditrisiko (DE-588)4114309-7 gnd Liquidität (DE-588)4035908-6 gnd Portfoliomanagement (DE-588)4115601-8 gnd Risikomanagement (DE-588)4121590-4 gnd |
| topic_facet | Credit Management Portfolio management Kreditrisiko Liquidität Portfoliomanagement Risikomanagement |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=020219501&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
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