Credit Risk

<body onLoad="MM_checkPlugin('Shockwave Flash','','http://www.riskglossary.com/default_nofl.htm',false);return document.MM_returnValue" stylesrc="../_private/template.htm" bgcolor="#FFFFFF" link="#669933" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table1"> <tr> <td width="740"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" height="37" id="table2"> <tr> <td height="35" width="100%"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table3"> <tr> <td width="100%" align="left" valign="top"> <p class="header_gold">Credit Risk</td> <td width="45" align="right" valign="bottom"> <map name="FPMap6"> <area href="http://www.contingencyanalysis.com" shape="rect" coords="1, 0, 44, 11" target="_top"> </map> <img border="0" src="../images/home.gif" usemap="#FPMap6" width="45" height="12"></td> </tr> </table> </td> </tr> <tr> <td width="100%" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td width="0%" valign="top" bgcolor="#FFFFCC"> <table border="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" cellspacing="1" id="table4"> <tr> <td width="0%" align="left" valign="top"> <p class="header2_black">Explained:<br> <img border="0" src="../images/blank_1x100.gif" width="100" height="1"></td> <td width="0%" align="left" valign="top"><p class="word_list"> <a href="#credits">credit</a><p class="word_list"> <a href="#credit analysis">credit analysis</a><p class="word_list"> <a href="#credit analysts">credit analyst</a><p class="word_list"> <a href="#credit exposure">credit exposure</a><p class="word_list"> <a href="#credit quality">credit quality</a><p class="word_list"> <a href="#credit rating">credit rating</a><br> <img border="0" src="../images/blank_1x160.gif" width="160" height="1"></td> <td width="100%" align="left" valign="top"><p class="word_list"> <a href="#Credit risk">credit risk</a><p class="word_list"> <a href="#credit scoring">credit scoring</a><p class="word_list"> <a href="#default probability:">default probability</a><p class="word_list"> <a href="#expected default frequency">expected default frequency</a><p class="word_list"> <a href="#obligor">obligor</a><p class="word_list"> <a href="#recovery rate:">recovery rate</a><br> <img border="0" src="../images/blank_1x160.gif" width="160" height="1"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111" width="310" align="right" id="table5"> <tr> <td align="right" width="9" height="14"></td> <td width="300" height="14"> <font size="2"> </font><font size="4"> </font></td> </tr> <tr> <td align="right" width="9"> </td> <td width="300"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> </tr> </table> <p><b><a name="Credit risk">Credit risk</a></b> is risk due to uncertainty in a counterparty's (also called an <b><a name="obligor">obligor</a>'s</b> or <b><a name="credits">credit's</a></b>) ability to meet its obligations. Because there are many types of counterparties—from individuals to sovereign governments—and many different types of obligations—from auto loans to <a href="../articles/derivative_instrument.htm">derivatives</a> transactions—credit risk takes many forms. Institutions manage it in different ways. </p> <p>In assessing credit risk from a single counterparty, an institution must consider three issues: </p> <p class="bullet_line_space"><img border="0" src="../images/bullet.gif" width="20" height="10"><b><a name="default probability:">default probability:</a></b> What is the likelihood that the counterparty will default on its obligation either over the life of the obligation or over some specified horizon, such as a year? Calculated for a one-year horizon, this may be called the <b><a name="expected default frequency">expected default frequency</a></b>.</p> <p class="bullet_line_space"><img border="0" src="../images/bullet.gif" width="20" height="10"><b><a name="credit exposure">credit exposure</a>:</b> In the event of a default, how large will the outstanding obligation be when the default occurs? <p class="bullet_line_space"><img border="0" src="../images/bullet.gif" width="20" height="10"><b><a name="recovery rate:">recovery rate:</a></b> In the event of a default, what fraction of the exposure may be recovered through bankruptcy proceedings or some other form of settlement?</p> <p class="body">When we speak of the <a name="credit quality"><b>credit quality</b></a> of an obligation, this refers generally to the counterparty's ability to perform on that obligation. This encompasses both the obligation's default probability and anticipated recovery rate.</p> <p class="body">To place credit exposure and credit quality in perspective, recall that every <a href="../articles/risk.htm">risk</a> comprise two elements: exposure and uncertainty. For credit risk, credit exposure represents the former, and credit quality represents the latter.</p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="345" align="right" id="table6"> <tr> <td align="right" width="9"> </td> <td width="336"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> </tr> </table> <p class="body">For loans to individuals or small businesses, credit quality is typically assessed through a process of <b><a name="credit scoring">credit scoring</a></b>. Prior to extending credit, a bank or other lender will obtain information about the party requesting a loan. In the case of a bank issuing credit cards, this might include the party's annual income, existing debts, whether they rent or own a home, etc. A standard formula is applied to the information to produce a number, which is called a credit score. Based upon the credit score, the lending institution will decide whether or not to extend credit. The process is formulaic and highly standardized.</p> <p class="body">Many forms of credit risk—especially those associated with larger institutional counterparties—are complicated, unique or are of such a nature that that it is worth assessing them in a less formulaic manner. The term <b><a name="credit analysis">credit analysis</a></b> is used to describe any process for assessing the credit quality of a counterparty. While the term can encompass credit scoring, it is more commonly used to refer to processes that entail human judgment. One or more people, called <b><a name="credit analysts">credit analysts</a></b>, will review information about the counterparty. This might include its balance sheet, income statement, recent trends in its industry, the current economic environment, etc. They may also assess the exact nature of an obligation. For example, secured debt generally has higher credit quality than does subordinated debt of the same issuer. Based upon this analysis, the credit analysts assign the counterparty (or the specific obligation) a <b> <a name="credit rating">credit rating</a></b>, which can be used for making credit decisions.</p> <p class="body">Many banks, investment managers and insurance companies hire their own credit analysts who prepare credit ratings for internal use. Other firms—including Standard & Poor's, Moody's and Fitch—are in the business of developing credit ratings for use by investors or other third parties. Institutions that have publicly traded debt hire one or more of them to prepare credit ratings for their debt. Those credit ratings are then distributed for little or no charge to investors. Some regulators also develop credit ratings. In the United States, the National Association of Insurance Commissioners publishes credit ratings that are used for calculating capital charges for <a href="../articles/coupon_bond.htm">bond</a> portfolios held by insurance companies.</p> <p class="body">Exhibit 1 indicates the system of credit ratings employed by Standard & Poor's. Other systems are similar.</p> <div align="center"> <center> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="400" cellpadding="0" id="table7"> <tr> <td> <p class="exhibit_header"><span class="exhibit_header">Standard & Poor's Credit Ratings</span><br> <span class="exhibit_subheader">Exhibit 1</span></td> </tr> <tr> <td bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" bgcolor="#FFFFCC" id="table8"> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>AAA</b></td> <td class="exhibit_legend" align="left" valign="top">Best credit quality—Extremely reliable with regard to financial obligations.</td> </tr> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>AA</b></td> <td class="exhibit_legend" align="left" valign="top">Very good credit quality—Very reliable.</td> </tr> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>A</b></td> <td class="exhibit_legend" align="left" valign="top">More susceptible to economic conditions—still good credit quality.</td> </tr> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>BBB</b></td> <td class="exhibit_legend" align="left" valign="top">Lowest rating in <a href="../articles/junk_bond.htm">investment grade</a>.</td> </tr> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>BB</b></td> <td class="exhibit_legend" align="left" valign="top">Caution is necessary—Best sub-investment credit quality.</td> </tr> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>B</b></td> <td class="exhibit_legend" align="left" valign="top">Vulnerable to changes in economic conditions—Currently showing the ability to meet its financial obligations.</td> </tr> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>CCC</b></td> <td class="exhibit_legend" align="left" valign="top">Currently vulnerable to nonpayment—Dependent on favorable economic conditions.</td> </tr> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>CC</b></td> <td class="exhibit_legend" align="left" valign="top">Highly vulnerable to a payment default.</td> </tr> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>C</b></td> <td class="exhibit_legend" align="left" valign="top">Close to or already bankrupt—payment on the obligation currently continued.</td> </tr> <tr> <td width="50" class="exhibit_legend" align="left" valign="top"> <b>D</b></td> <td class="exhibit_legend" align="left" valign="top">Payment default on some financial obligation has actually occurred.</td> </tr> </table> </td> </tr> <tr> <td bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td> <p class="exhibit_legend">This is the system of credit ratings Standard & Poor's applies to bonds. Ratings can be modified with + or – signs, so a AA– is a higher rating than is an A+ rating. With such modifications, BBB– is the lowest investment grade rating. Other credit rating systems are similar. Source: Standard & Poor's.</td> </tr> </table> </center> </div> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="165" align="right" id="table9"> <tr> <td width="11"> </td> <td width="160"> </td> </tr> <tr> <td width="11"> </td> <td width="160"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td> </tr> </table> <p class="body">The manner in which credit exposure is assessed is highly dependent on the nature of the obligation. If a bank has loaned money to a firm, the bank might calculate its credit exposure as the outstanding balance on the loan. Suppose instead that the bank has extended a line of credit to a firm, but none of the line has yet been drawn down. The immediate credit exposure is zero, but this doesn't reflect the fact that the firm has the right to draw on the line of credit. Indeed, if the firm gets into financial distress, it can be expected to draw down on the credit line prior to any bankruptcy. A simple solution is for the bank to consider its credit exposure to be equal to the total line of credit. However, this may overstates the credit exposure. Another approach would be to calculate the credit exposure as being some fraction of the total line of credit, with the fraction determined based upon an analysis of prior experience with similar credits.</p> <p class="body">Credit risk modeling is a concept that broadly encompasses any algorithm-based methods of assessing credit risk. The term encompasses credit scoring, but it is more frequently used to describe the use of <a href="../articles/asset_value_model.htm">asset value models</a> and <a href="../articles/intensity_model.htm">intensity models</a> in several contexts. These include</p> <p class="bullet_line_space"><img border="0" src="../images/bullet.gif" width="20" height="10">supplanting traditional credit analysis;</p> <p class="bullet_line_space"><img border="0" src="../images/bullet.gif" width="20" height="10">being used by <a href="../articles/option_pricing_theory.htm">financial engineers</a> to value <a href="../articles/credit_derivative.htm">credit derivatives</a>; and</p> <p class="bullet_line_space"><img border="0" src="../images/bullet.gif" width="20" height="10">being extended as <a href="../articles/portfolio_credit_risk.htm">portfolio credit risk measures</a> used to analyze the credit risk of entire portfolios of obligations to support <a href="../articles/securitization.htm">securitization</a>, <a href="../articles/risk_management.htm">risk management</a> or regulatory purposes.</p> <p class="body">Derivative instruments represent contingent obligations, so they entail credit risk. While it is possible to measure the <a href="../articles/presettlement_risk.htm">mark-to-market credit exposure</a> of derivatives based upon their current <a href="../articles/valuation.htm">market values</a>, this <a href="../articles/risk_metric_and_risk_measure.htm">metric</a> provides an incomplete picture. For example, many derivatives, such as <a href="../articles/forward.htm">forwards</a> or <a href="../articles/swap.htm">swaps</a>, have a market value of zero when they are first entered into. Mark-to-market exposure—which is based only on current market values—does not capture the potential for market values to increase over time. For that purpose some probabilistic metric of <a href="../articles/presettlement_risk.htm">potential credit exposure</a> must be used. </p> <p class="body">There are many ways that credit risk can be managed or mitigated. The first line of defense is the use of credit scoring or credit analysis to avoid extending credit to parties that entail excessive credit risk. Credit <a href="../articles/risk_limits.htm">risk limits</a> are widely used. These generally specify the maximum exposure a firm is willing to take to a counterparty. Industry limits or country limits may also be established to limit the sum credit exposure a firm is willing to take to counterparties in a particular industry or country. Calculation of exposure under such limits requires some form of <a href="../articles/default_model.htm">credit risk modeling</a>. Transactions may be structured to include <a href="../articles/collateral.htm">collateralization</a> or various <a href="../articles/credit_enhancement.htm">credit enhancements</a>. Credit risks can be hedged with <a href="../articles/credit_derivative.htm">credit derivatives</a>. Finally, firms can hold <a href="../articles/capital_allocation.htm">capital</a> against outstanding credit exposures.</p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table10"> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Internal Links</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table11"> <tr> <td width="100%"> <p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/coupon_bond.htm">bond</a> Securitized debt.</p> <p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/corporate_bond.htm">corporate bond</a> A bond issued by a corporation.</strong></p> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/credit_derivative.htm">credit derivative</a> A derivative instrument designed to transfer credit risk from one party to another.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/credit_enhancement.htm">credit enhancement</a> Any methodology that reduces the credit risk of a transaction with a counterparty.<p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/default_model.htm">default model</a> A type of model that assess the likelihood of default by an obligor.</p> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/risk_management.htm">financial risk management</a> Practices by which a firm optimizes the manner in which it takes financial risk.<p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/interest_rate_spreads.htm">interest rate spreads</a> <i>An overview article.</i></p> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/legal_risk.htm">legal risk</a> Risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/liquidity_risk.htm">liquidity risk</a> Risk due to uncertain liquidity.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/market_risk.htm">market risk</a> Exposure to the uncertain market value of a portfolio.<p class="explanatory_text" align="left"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/operational_risk.htm">operational risk</a> Risk due to human error, systems failure or external events.</strong><p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/portfolio_credit_risk.htm">portfolio credit risk</a> Credit risk associated with a portfolio of obligations, typically of multiple obligors.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/presettlement_risk.htm">pre-settlement risk</a> Credit risk of default on a derivative instrument prior to final settlement.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/risk.htm">risk</a> Comprises two components: uncertainty and exposure.</strong><p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/risk_limits.htm">risk limit</a></strong><strong style="FONT-WEIGHT: 400"> A limit placed upon risk taking activity for the purpose of avoiding excessive risk.</strong><p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/settlement_risk.htm">settlement risk</a> A </strong>form of credit risk that arises at the settlement of a transaction.</td> </tr> </table> </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Books</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table12"> <tr> <td width="100%"> <p class="explanatory_text">For a sophisticated overview of credit risk, see Caouette et al (<a target="_blank" href="http://www.riskbook.com/link/caouette_altman_narayanan_(1998).htm">1998</a>). Ganguin and Bilardello (<a target="_blank" href="http://www.riskbook.com/link/ganguin_and_bilardello_(2005).htm">2005</a>) is an excellent introduction to credit analysis for corporate bonds. Glantz (<a target="_blank" href="http://www.riskbook.com/link/glantz_m_(2003).htm">2003</a>) is an excellent book on credit risk in bank commercial lending. With credit risk models starting to supplant traditional credit analysis, and regulators increasingly invoking agency credit ratings in their regulations, there is much controversy surrounding the use of credit ratings. For insightful discussions of current trends, see Ong (<a target="_blank" href="http://www.riskbook.com/link/ong_m_(2002).htm">2003</a>). For detailed descriptions of asset value models and intensity models, see Bluhm et al (<a target="_blank" href="http://www.riskbook.com/link/bluhm_overbeck_wagner_(2003).htm">2002</a>) and Duffie and Singleton (<a target="_blank" href="http://www.riskbook.com/link/duffie_and_singleton_(2003).htm">2003</a>), respectively.</p> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table13"> <tr> <td width="100" align="left" valign="top"> <map name="FPMap445"> <area target="_blank" href="http://www.riskbook.com/link/caouette_altman_narayanan_(1998).htm" shape="rect" coords="0, 0, 82, 124"> </map> <img border="0" src="../images/book_caouette_et_al_(1998)_125.gif" usemap="#FPMap445" width="83" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table14"> <tr> <td width="90%" colspan="3"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/caouette_altman_narayanan_(1998).htm"> <font size="3">Managing Credit Risk <br> </font><font size="2">The Next Great Financial Challenge </font></a></td> </tr> <tr> <td colspan="3"> <p class="author"><b>J. Caouette, E. Altman and P. Narayanan</b></td> </tr> <tr> <td width="10%"><map name="FPMap14"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/star_5.gif" usemap="#FPMap14" width="90" height="16"></td> <td width="10%" class="author">quality</td> <td width="70%"> <p class="author"> </td> </tr> <tr> <td width="10%"><map name="FPMap15"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/tech_1.gif" usemap="#FPMap15" width="90" height="16"></td> <td width="10%" class="author">technical</td> <td width="70%">  </td> </tr> <tr> <td width="10%"> <p class="author">1998</td> <td width="10%"> </td> <td width="70%"> <p align="center"><map name="FPMap23"> <area target="_blank" coords="0, 0, 145, 19" shape="rect" href="http://www.riskbook.com/link/caouette_altman_narayanan_(1998).htm"> </map> <img border="0" src="../images/pointer_review.gif" usemap="#FPMap23" width="146" height="20"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table15"> <tr> <td width="100" align="left" valign="top"> <map name="FPMap791"> <area target="_blank" coords="0, 0, 84, 124" shape="rect" href="http://www.riskbook.com/link/ganguin_and_bilardello_(2005).htm"> </map> <img border="0" src="../images/book_ganguin_and_bilardello_(2005)_125.gif" usemap="#FPMap791" width="85" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table16"> <tr> <td width="90%" colspan="3" valign="top"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/ganguin_and_bilardello_(2005).htm"> Fundamentals of Corporate Credit Analysis</a></td> </tr> <tr> <td colspan="3"> <p class="author"><b>Blaise Ganguin and John Bilardello</b></td> </tr> <tr> <span style="font-family: Times New Roman; letter-spacing: -0.2pt"> <td width="10%"><map name="FPMap789"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/star_5.gif" usemap="#FPMap789" width="90" height="16"></td> </span> <td width="10%" class="author">quality</td> <td width="70%"> <p class="author"> </td> </tr> <tr> <span style="font-family: Times New Roman; letter-spacing: -0.2pt"> <td width="10%"><map name="FPMap790"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/tech_1.gif" usemap="#FPMap790" width="90" height="16"></td> </span> <td width="10%" class="author">technical</td> <td width="70%">  </td> </tr> <tr> <td width="10%"> <p class="author">2005</td> <td width="10%"> </td> <td width="70%"> <p align="center"><map name="FPMap668"> <area target="_blank" coords="0, 0, 145, 19" shape="rect" href="http://www.riskbook.com/link/ganguin_and_bilardello_(2005).htm"> </map> <img border="0" src="../images/pointer_review.gif" usemap="#FPMap668" width="146" height="20"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table17"> <tr> <td width="100" align="left" valign="top"> <map name="FPMap442"> <area target="_blank" href="http://www.riskbook.com/link/glantz_m_(2003).htm" shape="rect" coords="0, 0, 83, 124"> </map> <img border="0" src="../images/book_glantz_m_(2003)_125.jpg" usemap="#FPMap442" width="84" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table18"> <tr> <td width="90%" colspan="3"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/glantz_m_(2003).htm"> Managing Bank Risk</a></td> </tr> <tr> <td colspan="3"> <p class="author"><b>Morton Glantz</b></td> </tr> <tr> <td width="10%"> <map name="FPMap468"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"></map> <img border="0" src="../images/star_6.gif" usemap="#FPMap468" width="90" height="16"></td> <td width="10%" class="author">quality</td> <td width="70%"> <p class="author"> </td> </tr> <tr> <td width="10%"> <map name="FPMap469"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/tech_2.gif" usemap="#FPMap469" width="90" height="16"></td> <td width="10%" class="author">technical</td> <td width="70%">  </td> </tr> <tr> <td width="10%"> <p class="author">2003</td> <td width="10%"> </td> <td width="70%"> <p align="center"><map name="FPMap366"> <area target="_blank" coords="0, 0, 145, 19" shape="rect" href="http://www.riskbook.com/link/glantz_m_(2003).htm"> </map> <img border="0" src="../images/pointer_review.gif" usemap="#FPMap366" width="146" height="20"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table19"> <tr> <td width="100" align="left" valign="top"> <map name="FPMap470"> <area target="_blank" href="http://www.riskbook.com/link/ong_m_(2002).htm" shape="rect" coords="0, 0, 87, 124"> </map> <img border="0" src="../images/book_ong_(2002)_125.jpg" usemap="#FPMap470" width="88" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table20"> <tr> <td width="90%" colspan="3"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/ong_m_(2002).htm"> Credit Ratings <br> <font size="2">Methodologies, Rationale and Default Risk</font></a><font size="2"> </font></td> </tr> <tr> <td colspan="3"> <p class="author"><b>Michael Ong</b></td> </tr> <tr> <td width="10%"> <map name="FPMap423"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/star_5.gif" usemap="#FPMap423" width="90" height="16"></td> <td width="10%" class="author">quality</td> <td width="70%"> <p class="author"> </td> </tr> <tr> <td width="10%"> <map name="FPMap424"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map><img border="0" src="../images/tech_2.gif" usemap="#FPMap424" width="90" height="16"></td> <td width="10%" class="author">technical</td> <td width="70%">  </td> </tr> <tr> <td width="10%"> <p class="author">2002</td> <td width="10%"> </td> <td width="70%"> <p align="center"><map name="FPMap443"> <area target="_blank" coords="0, 0, 145, 19" shape="rect" href="http://www.riskbook.com/link/ong_m_(2002).htm"> </map> <img border="0" src="../images/pointer_review.gif" usemap="#FPMap443" width="146" height="20"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table21"> <tr> <td width="100" align="left" valign="top"><map name="FPMap46"> <area target="_blank" href="http://www.riskbook.com/link/bluhm_overbeck_wagner_(2003).htm" shape="rect" coords="0, 0, 81, 124"> </map> <img border="0" src="../images/book_bluhm_et_al_(2002)_125.gif" usemap="#FPMap46" width="82" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table22"> <tr> <td width="90%" colspan="3"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/bluhm_overbeck_wagner_(2003).htm"> <font size="2">An Introduction to</font><br> Credit Risk Modeling</a></td> </tr> <tr> <td colspan="3"> <p class="author"><b>C. Bluhm, L. Overbeck and C. Wagner</b></td> </tr> <tr> <td width="10%"><map name="FPMap47"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/star_5.gif" usemap="#FPMap47" width="90" height="16"></td> <td width="10%" class="author">quality</td> <td width="70%"> <p class="author"> </td> </tr> <tr> <td width="10%"><map name="FPMap48"> <area target="_top" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/tech_4.gif" usemap="#FPMap48" width="90" height="16"></td> <td width="10%" class="author">technical</td> <td width="70%">  </td> </tr> <tr> <td width="10%"> <p class="author">2002</td> <td width="10%"> </td> <td width="70%"> <p align="center"><map name="FPMap45"> <area target="_blank" coords="0, 0, 145, 19" shape="rect" href="http://www.riskbook.com/link/bluhm_overbeck_wagner_(2003).htm"> </map> <img border="0" src="../images/pointer_review.gif" usemap="#FPMap45" width="146" height="20"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table23"> <tr> <td width="100" align="left" valign="top"> <map name="FPMap664"> <area target="_blank" href="http://www.riskbook.com/link/duffie_and_singleton_(2003).htm" shape="rect" coords="0, 0, 82, 124"> </map> <img border="0" src="../images/book_duffie_singleton_(2003)_125.gif" usemap="#FPMap664" width="83" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table24"> <tr> <td width="90%" colspan="3"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/duffie_and_singleton_(2003).htm">Credit Risk<br> <font size="2">Pricing, Measurement, and Management</font></a></td> </tr> <tr> <td colspan="3"> <p class="author"><b>Darrell Duffie and Ken Singleton</b></td> </tr> <tr> <td width="10%"><map name="FPMap665"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/star_5.gif" usemap="#FPMap665" width="90" height="16"></td> <td width="10%" class="author">quality</td> <td width="70%"> <p class="author"> </td> </tr> <tr> <td width="10%"><map name="FPMap666"> <area target="_top" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/tech_4.gif" usemap="#FPMap666" width="90" height="16"></td> <td width="10%" class="author">technical</td> <td width="70%">  </td> </tr> <tr> <td width="10%"> <p class="author">2003</td> <td width="10%"> </td> <td width="70%"> <p align="center"><map name="FPMap667"> <area target="_blank" coords="0, 0, 145, 19" shape="rect" href="http://www.riskbook.com/link/duffie_and_singleton_(2003).htm"> </map> <img border="0" src="../images/pointer_review.gif" usemap="#FPMap667" width="146" height="20"></td> </tr> </table> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Sponsored Links</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" width="75"> <img border="0" src="../images/ad_side_banner_2.jpg" width="103" height="285"></td> <td bgcolor="#FFFFCC" width="99%">  <p class="ad_legend" style="margin-left: 0; margin-bottom:2"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font color="#000000">Ads by Contingency Analysis</font></a></p> <p style="margin-top: 0; margin-bottom: 0"> <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=336x265;setID=82436;type=iframe" style="margin: 0px; padding: 0px; border-width: 0px" width="336" height="265" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" name="I1"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=336x265;setID=82436;type=js" type="text/javascript"> </script> <noscript> <a href="http://servedbyadbutler.com/go2/;ID=147917;size=336x265;setID=82436"> <img src="http://servedbyadbutler.com/adserve.ibs/;ID=147917;size=336x265;setID=82436;type=img" border="0" height="265" width="336" alt=""></a> </noscript><![endif]></iframe>   </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Forum Discussions</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table25"> <tr> <td width="100%"> <p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.contingencyanalysis.com/archive/link_thread/03-2/0000002d.htm">Setting client credit limits</a> <i>29 Apr 2003</i><br> On what basis should counterparty credit limits be set?<p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.contingencyanalysis.com/archive/link_thread/02-4/000004f8.htm">Credit risk in equity derivatives</a> <i>16 Sep 2002</i><br> Back-to-back deals eliminate market risk but not credit risk.<p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.contingencyanalysis.com/archive/link_thread/02-1/000012c0.htm">Addition of VaR</a> <i>18 Feb 2002</i><br> Combining market risk and credit risk into a single risk measure.<p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.contingencyanalysis.com/archive/link_thread/99-3/000000e8.htm">interest rate for bad credit recovery</a> <i>04 Jun 1999</i><br> At what interest rate should the value of distressed debt be discounted? <p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.contingencyanalysis.com/archive/link_thread/98-3/0000007f.htm">CreditMetrics Technical Document</a> <i>08 Jul 1998<br> </i>Brief exchange about technical aspects of the CreditMetrics methodology.<p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.contingencyanalysis.com/archive/link_thread/97-4/0000008f.htm">Common Credit Exposure Calculations</a> <i>13 Oct 1997</i><br> Credit exposure for bonds.</td> </tr> </table> </td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table26"> <tr> <td width="100%" bgcolor="#FFFFFF"> <p align="center"><map name="FPMap365"> <area target="_top" href="http://www.riskglossary.com" shape="rect" coords="0, 0, 164, 102"> </map><img border="0" src="../images/logo.jpg" usemap="#FPMap365" width="165" height="103"></p> <p align="center"><span class="verdana10"> <a href="http://www.riskglossary.com/main/disclaimer.htm" target="_self"> Disclaimer</a></span></p> <p align="center">website: <span class="verdana10"> <a target="_top" href="http://www.contingencyanalysis.com"> http://www.contingencyanalysis.com</a></span><br> glossary direct link: <span class="verdana10"> <a target="_top" href="http://www.riskglossary.com"> http://www.riskglossary.com</a></span><br> copyright © Contingency Analysis, 2003</td> </tr> </table> </td> </tr> </table> </td> <td>  </td> </tr> </table> </div> </body>