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Taming Risk: Complete Credit Portfolio Management

ISBN: 978 1 84374 133 6

Publisher: Euromoney Books

Explains the background, size and growth of the credit markets, the nature of credit risk, the historical pattern of credit returns, the approach of the rating agencies and the motivation for credit portfolio management. Why and how has the credit market reached its current size? What is the scope and complexity of the various credit sectors? Why it is likely to grow rapidly in the future?

Price: £175

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For all professionals involved in credit portfolio management in banks, insurance companies, money funds and government agencies, as well as risk managers and regulators.

Extensive, practical discussion of the tools available for portfolio management, including loan trading, credit derivatives, and the modelling of credit instruments in a portfolio context. Readers will achieve a thorough understanding of the credit markets and instruments.

Individual chapters address the practical issues facing different types of investors: banks, institutional credit fund managers, insurance companies, and opportunities and risks facing private clients looking to add credit to their portfolios.

About the author
Acknowledgements
Preface
Objectives and structure

Part I: Background and motivation

Chapter 1: Introduction and overview of the credit markets
Introduction
The growth of credit as an asset class in Europe
Key growth sectors in Europe
Rating agency measures of risk: default, recovery and transition
Risk and return in the credit market: credit spreads
Conclusion

Chapter 2: Why credit portfolio management?
Introduction
Bank credit losses and inefficiencies
Performance measures: RAROC and ROE
Basel II and its implications
Rating mapping and convergence with rating agencies
IAS 39 and its implications
Convergence of risk measurement across industries
Conclusion

Part II: Techniques available to manage portfolio risk

Chapter 3: Instruments available to adjust exposure
Credit derivatives
Collateralised debt obligations and synthetic securitisation structures
Conclusion

Chapter 4: Creating liquidity in a loan book
Introduction
The secondary loan market
Securitising retail and illiquid assets
Conclusion

Chapter 5: Valuing credit instruments
Introduction: modelling default
Structural models
Reduced-form models
Using hazard rules to simulate time to default
The pros and cons of structural and reduced-form models
Modelling instruments whose payout depends on credit spreads
A simplified example of CDS valuation using Bloomberg
Conclusion

Chapter 6: Credit portfolio models
Introduction
Correlation
Credit portfolio models
What are the main commercial portfolio models?
Conclusion

Part III: Practical problems facing investors

Chapter 7: Concerns for banks in portfolio management
Introduction and background
What is a bank�s motivation?
What are the factors driving loan portfolio management?
Hurdles to implementation
How to establish an optimal organisational framework: the centralised portfolio model
Implications for smaller banks
Conclusion

Chapter 8: Risks in and solutions to credit fund management
Introduction
Background
Relative asset returns
The credit investment space
Risk and return in the European credit markets

Chapter 9: The private client investor: opportunities and risks
Introduction
Private client services
The challenges of private client management
The asset allocation process
Where does credit fit in a private client portfolio?
Private client investment in structured credit products
Advantages and risks of specialised credit instruments
Impact on a private client portfolio: examples
Conclusion

Chapter 10: Challenges for insurance companies
Overview
General observations
The size of insurance company involvement as underwriters in the credit market
Motivation
Which entities have been important underwriters of credit risk?
Legal and regulatory issues
Conclusion

Chapter 11: Conclusion and market outlook
Changing landscape of lending business for commercial banks
Credit market outlook

Taming Risk: Complete Credit Portfolio Management

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