Credit portfolio management: a practitioner's guide to active management of credit risks
Saved in:
| Main Author: | |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Hampshire [u.a.]
Palgrave Macmillan
2013
|
| Edition: | 1. publ. |
| Series: | Global financial markets series
|
| Subjects: | |
| Online Access: | Inhaltsverzeichnis Klappentext |
| Physical Description: | XXV, 260 S. graph. Darst. |
| ISBN: | 9780230391499 0230391494 |
Staff View
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| 245 | 1 | 0 | |a Credit portfolio management |b a practitioner's guide to active management of credit risks |c Michael Hünseler |
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| 264 | 1 | |a Hampshire [u.a.] |b Palgrave Macmillan |c 2013 | |
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Record in the Search Index
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|---|---|
| adam_text | Contents
List of Tables
xii
List of Figures
xiii
Foreword by Som-lok Leung
xvi
Preface
xix
Acknowledgements
xxii
List of Abbreviations
xxiii
Part I Charting the Course
-
Credit Risk Strategies
1
1
The Case for Credit Portfolio Management
3
1.1
Evolution and innovation:
Ups
and downs of credit
5
1.2
The age of credit crises
7
1.3
Credit risk management at the forefront
13
2
Credit Risk Strategies
18
2.1
The risk appetite framework
18
2.2
Risk culture
21
2.3
Credit risk strategies
25
2.3.1
Key requirements for an effective credit risk strategy
26
2.3.2
Credit risk strategy measures
27
2.4
Risk limits: Framing the credit risk strategy
28
2.4.1
Forms of credit concentrations and regulatory view
32
2.4.2
Measurement of concentration risk
34
2.4.3
Concentration-risk limits
36
2.4.3.1
Definition of risk limits
37
2.4.3.1.1
Risk limit object
37
2.4.3.1.2
Risk limit measures
37
2.4.3.2
Determination of risk limits
38
2.4.3.2.1
Quantitative risk limits
39
2.4.3.2.2
Qualitative risk limits:
Underwriting standards
40
2.4.3.2.3
Consistency check
41
2.4.3.3
Limit monitoring
41
2.4.3.4
Management of limit breaches
41
2.4.4
Syndication risk limits
43
vii
viii
Contents
3
What If: Credit Risk Stress Testing
45
3.1
Definition and objective of stress tests
46
3.2
Stressed scenarios
51
3.2.1
Hypothetical or
macroeconomic
scenarios
51
3.2.2
Historical or shock scenarios
52
3.2.3
Worst-case scenarios
52
3.2.4
Stress scenario requirements
53
3.3
Types of stress tests
54
3.3.1
Sensitivity analysis
54
3.3.2
Scenario analysis
55
3.3.3
What-if analysis
56
3.3.4
Concentration-risk analysis
57
3.3.4.1
Single name concentration-risk stress test
57
3.3.4.2
Sector concentration-risk stress test
58
3.3.5
Reverse stress testing
58
3.4
Stress test information and subsequent mitigation
59
3.5
Conclusion
60
Part II Credit Portfolio Management in Practice
63
4
Evolution of Portfolio Management Business Models
65
4.1
From credit advisory to active credit portfolio
management
67
4.2
A full cycle approach to credit portfolio management
72
4.3
Bridging distinct worlds: Loans, bonds and credit
derivatives
77
4.3.1
Asymmetric information in bank loans
78
4.3.2
Convergence of bank loans and debt capital
markets instruments
80
4.4
The role of loan transfer pricing
82
4.4.1
Risk-adjusted loan pricing
84
4.4.2
Loan transfer pricing
85
4.4.3
Loan transfer pricing based on observable loan
market prices
87
4.4.4
Loan transfer pricing based on observable
credit spreads
89
4.4.5
Transfer pricing based on generic curves
92
4.4.6
Risk-adjusted versus transfer pricing
96
4.5
Practical implementation: Organizational and
infrastructure challenges
98
4.5.1
Governance and mandate
99
4.5.2
Organizational design
102
4.5.3
Performance measurement and communication
105
Contents IX
4.5.4 Portfolio
analytics and IT
infrastructure
106
4.5.5 Implementation
of
an ACPM
function
107
5
Accounting Complexity and Implications
109
5.1
Hedge accounting and other solutions for accounting
asymmetry
114
5.1.1
Hedge accounting for credit risk
116
5.1.1.1
Types of hedge accounting and
requirements
117
5.1.1.2
Assessing fair value changes and
measuring hedge effectiveness
119
5.1.1.3
Hedge accounting-eligible assets
and strategy
120
5.1.1.4
Conclusion
123
5.1.2
Fair-valuing loans
124
5.1.2.1
FVO-eligible assets and pricing
125
5.1.2.2
Regulatory requirements for application
ofFVO
127
5.1.2.3
Conclusion
127
5.1.3
Financial guarantee
128
5.1.3.1
Accounting rules for financial guarantees
129
5.1.3.2
Conclusion
130
5.1.4
Combination of hedge and reinvestment portfolio
131
5.1.4.1
DV01 neutral hedge and reinvestment
strategy
137
5.1.4.2
Beta-neutral hedge and reinvestment
strategy
139
5.1.4.3
Notional neutral hedge and reinvestment
strategy
140
5.1.4.4
Cost (cash flow) neutral hedge and
reinvestment strategy
142
5.1.4.5
Conclusion
144
>
Regulatory Capital Management under Basel
Π
145
6.1
Capital optimization
-
key considerations
146
6.2
Regulatory capital relief through CDS and guarantees
148
6.2.1
Determination of capital relief amount
151
6.2.2
Adjustments in capital reduction for CRM
154
6.3
Conclusion
157
Part III Hedging Techniques and Toolkits
159
CDS: Hedging of Issuer and Counterparty Risks
165
7.1
Mechanism and conventions of CDSs
168
x
Contents
7.1.1
Transaction
tenns
and conditions
169
7.1.2
Quotation conventions
169
7.1.2.1
Spread, fixed coupons, and upfront
payments
171
7.1.2.2
Termination and coupon payment dates
173
7.1.3
Reference entity
174
7.1.4
Reference and deliverable obligations
174
7.2
Credit events
178
7.2.1
Hard credit events
180
7.2.2
Restructuring credit event
183
7.3
Settlement after a credit event
192
7.3.1
Physical settlement
192
7.3.2
Cash settlement and auction mechanics
194
7.3.3
Final price versus loss given default
204
7.4
Succession events
206
8
Loan Credit Derivatives,
Subparticipations
and
Credit Indices
209
8.1
Loan only credit derivatives
-
LCDSs
209
8.1.1
LCDS deliverables
211
8.1.2
Information advantage
212
8.1.3
Early termination
212
8.1.4
The new North American Bullet LCDS
214
8.1.4.1
Refinancing event
214
8.1.4.2
Convention changes
215
8.1.5
Settlement after a credit event
216
8.2
Subparticipations
216
8.2.1
Participations from the perspective of the
grantor and the investor
217
8.2.1.1
Loan administration
217
8.2.1.2
Alignment of interest and recourse
to grantor
218
8.2.1.3
Grantor credit risk and insolvency
218
8.2.2
Default event
219
8.2.3
Comparison of
subparticipations
to
standardized CDS
219
8.2.4
Conclusion
220
8.3
Linear credit indices
221
8.3.1
Index family and composition
221
8.3.2
Credit events for CDS indices
224
9
Hedge Strategies for Baskets, Swaptions, and Macro Hedges
226
9.1
Nth-to-default baskets: Combining default risk
with correlation
227
Contents
xi
9.1.1
Pricing the correlation factor
229
9.1.2
Hedging strategies using nth-to-default baskets
230
9.1.3
Hedging concentration risk
230
9.1.4
Hedging tail risks
231
9.1.5
Hedging idiosyncratic risk in a benign credit
environment
231
9.2 Swaptions:
Adding a volatility risk component to
default protection
232
9.2.1
Conventions
234
9.2.2
Default event
236
9.2.3
CDS option strategies
236
9.2.3.1
Development of a hedge strategy
using swaptions
239
9.2.3.2
Long-payer option
241
9.2.3.3
Payer spread
242
9.2.3.4
Payer spread
1x2
244
9.2.3.5
Long butterfly
244
9.2.4
Option Greeks
245
9.2.5
Conclusion
246
9.3
Cross-asset hedging strategies
247
9.3.1
Selection criteria for macro hedges
247
9.3.2
Isolating sovereign risk
248
9.3.3
Equity versus debt hedge
249
9.3.4
Conclusion
251
References
253
Index
257
With the banking industry
¡η
flux and the credit business
at its core, Credit Portfolio Management is a timely and
practical guide on how to successfully manage a credit
portfolio in light of a challenging market environment
and increased regulatory scrutiny.
Structured in line with a credit value chain, Part
í
deals
with the framework in which credit risk is originated and
managed. It comprises of three chapters: a brief
description of the role that credit risk played in the
financial crisis and thereafter; the credit risk strategies
which aim at optimizing the risk/return profile of the
portfolio under the condition of adequate capital; and
finally an introduction to stress tests which support a
proactive and forward looking approach to portfolio
management by allowing the quantification of improbable
but plausible outcomes.
In Part II, conceptual aspects of an Active Credit Portfolio
Management (ACPM] are discussed. It ranges from the
description of the value proposition to a full credit cycle
approach to portfolio management. Since in most
organizations a loan transfer pricing scheme underpins
the internal role of ACPM to optimize the risk and the
return side of credit portfolio, it is given due consideration.
Part II also reviews practical aspects of the implementation
of ACPM, and dedicates a chapter to the accounting
symmetry of credit derivative hedges and loans. It
concludes with an overview of regulatory capita! relief.
Part til focuses on the back end management of a credit
portfolio where corrective actions are usually carried
out by use of controversial credit default swaps. Michael
provides
a non
technical, detailed description of CDS as
a hedging tool for credit portfolio managers whilst also
introducing other hedge instruments such as Loan CDS
and sub-participations.
A number of case studies are used throughout the book
to illustrate the various topics in a real world setting.
palgrave
macmillan
|
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| isbn | 9780230391499 0230391494 |
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| spelling | Hünseler, Michael 1971- Verfasser (DE-588)1038021812 aut Credit portfolio management a practitioner's guide to active management of credit risks Michael Hünseler 1. publ. Hampshire [u.a.] Palgrave Macmillan 2013 XXV, 260 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Global financial markets series Portfoliomanagement (DE-588)4115601-8 gnd rswk-swf Portfoliomanagement (DE-588)4115601-8 s DE-604 Digitalisierung UB Bayreuth - ADAM Catalogue Enrichment application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=026857778&sequence=000003&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis Digitalisierung UB Bayreuth - ADAM Catalogue Enrichment application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=026857778&sequence=000004&line_number=0002&func_code=DB_RECORDS&service_type=MEDIA Klappentext |
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| subject_GND | (DE-588)4115601-8 |
| title | Credit portfolio management a practitioner's guide to active management of credit risks |
| title_auth | Credit portfolio management a practitioner's guide to active management of credit risks |
| title_exact_search | Credit portfolio management a practitioner's guide to active management of credit risks |
| title_full | Credit portfolio management a practitioner's guide to active management of credit risks Michael Hünseler |
| title_fullStr | Credit portfolio management a practitioner's guide to active management of credit risks Michael Hünseler |
| title_full_unstemmed | Credit portfolio management a practitioner's guide to active management of credit risks Michael Hünseler |
| title_short | Credit portfolio management |
| title_sort | credit portfolio management a practitioner s guide to active management of credit risks |
| title_sub | a practitioner's guide to active management of credit risks |
| topic | Portfoliomanagement (DE-588)4115601-8 gnd |
| topic_facet | Portfoliomanagement |
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