简介
Summary:
Publisher Summary 1
The Banker's Handbook on Credit Risk shows you how to comply with Basel II regulations on credit risk step by step, building on the basics in credit risk up to advanced credit risk methodologies. This advanced credit/risk management book takes a "new tools" approach to Basel II implementation. The hands-on applications covered in this book are vast, including areas of Basel II banking risk requirements (credit risk, credit spreads, default risk, value at risk, market risk, and so forth) and financial analysis (exotic options and valuation), to risk analysis (stochastic forecasting, risk-based Monte Carlo simulation, portfolio optimization) and real options analysis (strategic options and decision analysis). This book is targeted at banking practitioners and financial analysts who require the algorithms, examples, models, and insights in solving more advanced and even esoteric problems.
The book comes complete with a DVD filled with sample modeling videos, case studies, and software applications to help the reader get started immediately. The various trial software applications included allows the reader to quickly access the approximately 670 modeling functions, 250 analytical model templates, and powerful risk-based simulation software to help in the understanding and learning of the concepts covered in the book, and also to use the embedded functions and algorithms in their own models. In addition, the reader can get started quickly in running risk-based Monte Carlo simulations, run advanced forecasting methods, and perform optimization on a myriad of situations, as well as structure and solve customized real options and financial options problems.
* Only book to show bankers step by step how to comply with Basel II regulations on credit risk
* Over 150 hands-on software applications included on the DVD accompanying the book, including sample modeling videos
* Provides all the latest quantitative tools
目录
Cover 1
Table of contents 8
Preface 9
CHAPTER 1: Basel II and Principles for the Management of Credit Risk 14
Features of Basel II Pillar 1 15
Summary of the Second Pillar\u201eSupervisory Review of Capital Adequacy 21
A Summary of the Third Pillar\u201eMarket Discipline 23
Modeling Toolkit and Basel\u2019s Principles for the Management of Credit Risk 25
CHAPTER 2: International Financial Reporting Standards and Basel II 34
Scope of International Financial Reporting Standards (IFRSs) 35
The Auditor\u2019s Role 36
Certified Opinions 37
Qualified Audit 38
Adverse Opinion 38
Compilation 38
Historical Cost 38
Accounting Standards as Applied to Revenue Realization 39
The Matching Principle 39
Consistency 40
Disclosure 40
Objectivity 40
Off-Balance-Sheet Financial Reporting 41
Financial Instruments with Off-Balance-Sheet Risk 45
Discretionary Items 47
A Banker\u2019s Guide: Uncovering Shenanigans 48
CHAPTER 3: Decomposing Cash Flow: A Banker\u2019s Primer 52
Indirect Method of Cash Reporting: The Banker\u2019s Cash Flow 53
Direct Method of Reporting Cash 54
Financing Activities 56
Cash Flow Workshop 63
Gem Furniture Company Fiscal Statements 64
Final Points about Cash Flow Analysis 75
Enron Cash Flow Decomposition 76
Cash Flow Reconstruction 77
CHAPTER 4: Step-by-Step in Getting Started with the Modeling Toolkit and Risk Simulator Software Applications 80
Introduction to the Modeling Toolkit Software 80
Introduction to Risk Simulator 81
Running a Monte Carlo Simulation 83
Using Forecast Charts and Confidence Intervals 93
Correlations and Precision Control 95
Applying Correlations in Risk Simulator 96
The Effects of Correlations in Monte Carlo Simulation 96
Tornado and Sensitivity Tools in Simulation 98
Sensitivity Analysis 104
Distributional Fitting: Single Variable and Multiple Variables 108
Bootstrap Simulation 110
Data Extraction, Saving Simulation Results, and Generating Reports 115
Regression and Forecasting Diagnostic Tool 116
Statistical Analysis Tool 122
Distributional Analysis Tool 127
CHAPTER 5: Analytical Forecasting and Cash Flow Projections 132
Advanced Analytical Forecasting with Risk Simulator 133
Different Types of Forecasting Techniques 133
Running the Forecasting Tool in Risk Simulator 135
Time-series Analysis 135
Multivariate Regression 138
Stochastic Forecasting 140
Nonlinear Extrapolation 145
Box-Jenkins ARIMA Advanced Time Series 147
\u008dSensitivity沤 Financial Forecasting 151
CHAPTER 6: Using Risk Simulator Optimization Procedures and Basel II Modeling Toolkit\u2019s Corporate Valuation Model 158
Mini Case 159
Risk Simulator Optimization Procedures 162
Risk Simulator Optimization Procedures Volatility and Optimization 166
CHAPTER 7: Analytical Techniques for Modeling Probability of Default, Loss Given Default, Economic Capital, Value at Risk, Portfolio Optimization, Hurdle Rates, and Rates of Return 176
Probability of Default 177
Loss Given Default and Expected Losses 183
Economic Capital and Value at Risk 185
Hurdle Rates and Required Rate of Return 197
CHAPTER 8: Portfolio Optimization 200
What Is an Optimization Model? 201
The Traveling Financial Planner 202
The Language of Optimization 203
Optimization Procedures 203
CHAPTER 9: Loan Pricing and Pricing Model Construction 216
Loan Pricing Models 216
Stochastic Net Borrowed Funds Pricing Model 217
Input Screen 217
Output Screen and Yield Calculation 223
Moving from Deterministic Pricing to Stochastic Pricing Solution 225
CHAPTER 10: Banker\u2019s Primer on Shareholder Value 230
Methods to Determine Value 231
Valuation Software 241
CHAPTER 11: Banker\u2019s Guide: Valuation Appraisal of Business Clients 242
Bank Loans and Other Financing 242
Valuation Appraisals\u201eDocuments and Information 244
Valuation Appraisal Outline 250
Valuation Appraisal Toolkit 254
CHAPTER 12: Constructing Industry-Specific Credit Rating Systems 258
The Structure of a Credit Risk Grading System 261
Risk Rating Computer Tutorial for Risk Rating Model.xls 262
Facility Grades 270
Building Industry-Specific/Risk-Specific Corporate Risk Rating Models 279
CHAPTER 13: Building Integrated Exposure Systems 286
Strategic Planning for the Loan Portfolio 287
GES and Loan Concentrations 292
GES and Assessment of Capital Adequacy 293
Liquidity Concerns 294
Customer Relationship and Marketing 294
GES and Disclosure to Outsiders 294
Exception Reports 295
Regulatory Reporting and GES 295
GES and Reports to the Board of Directors 296
Cross-Border Exposure Reporting 297
Data Architecture 299
Conclusion 304
CHAPTER 14: Credit Risk Rating and Debt Analysis (Credit Premium and Debt Options) 306
Illustrative Example: Credit Analysis\u201eCredit Premium 306
Illustrative Example: Credit Analysis\u201eCredit Risk Analysis and Effects on Prices 307
Illustrative Example: Credit Analysis\u201eExternal Debt Ratings and Spread 307
Illustrative Example: Credit Analysis\u201eInternal Credit Risk Rating Model 309
Illustrative Example: Credit Analysis\u201eProfit-Cost Analysis of New Credit 310
Illustrative Example: Debt Analysis\u201e Asset-Equity Parity Model 311
Illustrative Example: Debt Analysis\u201eCox Model on Price and Yield of Risky Debt with Mean Reverting Rates 312
Illustrative Example: Debt Analysis\u201eDebt Repayment and Amortization 313
Illustrative Example: Debt Analysis\u201eMerton Price of Risky Debt with Stochastic Asset and Interest 316
Illustrative Example: Debt Analysis\u201eVasicek Debt Option Valuation 317
Illustrative Example: Debt Analysis\u201eVasicek Price and Yield of Risky Debt 318
CHAPTER 15: Interest Rate Risk, Foreign Exchange Risk, Volatility Estimation, Risk Hedging, Yield Curve Forecasting, and Advanced Forecasting Techniques 320
Illustrative Example: Risk Analysis\u201eInterest Rate Risk 320
Illustrative Example: Risk Analysis\u201ePortfolio Risk Return Profiles 322
Illustrative Example: Risk Hedging\u201eDelta-Gamma Hedging 323
Illustrative Example: Risk Hedging\u201eDelta Hedging 324
Illustrative Example: Risk Hedging\u201eEffects of Fixed versus Floating Rates (Swaps) 325
Illustrative Example: Risk Hedging\u201eForeign Exchange Cash Flow Model 325
Illustrative Example: Risk Hedging\u201eHedging Foreign Exchange Exposure 328
Illustrative Example: Volatility\u201eImplied Volatility 330
Illustrative Example: Volatility\u201eVolatility Computations 330
Illustrative Example: Yield Curve\u201eCIR Model 338
Illustrative Example: Yield Curve\u201eCurve Interpolation BIM Model 339
Illustrative Example: Yield Curve\u201eCurve Spline Interpolation and Extrapolation Model 340
Illustrative Example: Yield Curve\u201eForward Rates from Spot Rates 341
Illustrative Example: Yield Curve\u201eTerm Structure of Volatility 342
Illustrative Example: Yield Curve\u201eU.S. Treasury Risk-free Rates 342
Illustrative Example: Yield Curve\u201eVasicek Model 345
Illustrative Example: Stochastic Forecasting of Interest Rates and Stock Prices 348
Illustrative Example: Econometric Forecasting using Box-Jenkins ARIMA 350
Illustrative Example: Time-Series Forecasting 351
CHAPTER 16: Exotic Options and Credit Derivatives 356
Illustrative Example: Exotic Options\u201eAccruals on Basket of Assets 358
Illustrative Example: Exotic Options\u201eAmerican Call Option on Foreign Exchange 359
Illustrative Example: Exotic Options\u201eBarrier Options 360
Illustrative Example: Exotic Options\u201eBinary Digital Options 361
Illustrative Example: Exotic Options\u201eCommodity Options 362
Illustrative Example: Exotic Options\u201eCurrency (Foreign Exchange) Options 363
Illustrative Example: Exotic Options\u201eExtreme Spreads Option 364
Illustrative Example: Exotic Options\u201eForeign Equity Linked Foreign Exchange Options in Domestic Currency 365
Illustrative Example: Exotic Options\u201eForeign Equity Struck in Domestic Currency 366
Illustrative Example: Exotic Options\u201eForeign Equity with Fixed Exchange Rate 366
Illustrative Example: Exotic Options\u201ePerpetual Options 367
Illustrative Example: Exotic Options\u201eRange Accruals (Fairway Options) 367
Illustrative Example: Options Analysis\u201eBinary Digital Instruments 368
Illustrative Example: Options Analysis\u201eOptions Trading Strategies 375
Illustrative Example: Options Analysis\u201eFive Plain Vanilla Options 378
Appendix 1: Getting Started with Real Options SLS Software Application on Modeling Customizable Exotic and Real Options 386
Single-Asset and Single-Phased Module 388
Multiple-Asset or Multiple-Phased SLS Module 395
Multinomial SLS Module 396
SLS Excel Solution Module 399
SLS Excel Functions Module 400
SLS Excel Lattice Maker Module 402
Appendix 2: Measuring Default Probability: A Practical Approach 405
Estimate Asset Value and Volatility 406
Calculate the Distance-to-Default 409
Calculate the Default Probability 410
Appendix 3: Server Based Applications for Running Data Intensive Basel II Credit and Market Risk Models 412
System Architecture 413
Rov Risk Modeler 414
Rov Risk Valuator 422
Index 426
Table of contents 8
Preface 9
CHAPTER 1: Basel II and Principles for the Management of Credit Risk 14
Features of Basel II Pillar 1 15
Summary of the Second Pillar\u201eSupervisory Review of Capital Adequacy 21
A Summary of the Third Pillar\u201eMarket Discipline 23
Modeling Toolkit and Basel\u2019s Principles for the Management of Credit Risk 25
CHAPTER 2: International Financial Reporting Standards and Basel II 34
Scope of International Financial Reporting Standards (IFRSs) 35
The Auditor\u2019s Role 36
Certified Opinions 37
Qualified Audit 38
Adverse Opinion 38
Compilation 38
Historical Cost 38
Accounting Standards as Applied to Revenue Realization 39
The Matching Principle 39
Consistency 40
Disclosure 40
Objectivity 40
Off-Balance-Sheet Financial Reporting 41
Financial Instruments with Off-Balance-Sheet Risk 45
Discretionary Items 47
A Banker\u2019s Guide: Uncovering Shenanigans 48
CHAPTER 3: Decomposing Cash Flow: A Banker\u2019s Primer 52
Indirect Method of Cash Reporting: The Banker\u2019s Cash Flow 53
Direct Method of Reporting Cash 54
Financing Activities 56
Cash Flow Workshop 63
Gem Furniture Company Fiscal Statements 64
Final Points about Cash Flow Analysis 75
Enron Cash Flow Decomposition 76
Cash Flow Reconstruction 77
CHAPTER 4: Step-by-Step in Getting Started with the Modeling Toolkit and Risk Simulator Software Applications 80
Introduction to the Modeling Toolkit Software 80
Introduction to Risk Simulator 81
Running a Monte Carlo Simulation 83
Using Forecast Charts and Confidence Intervals 93
Correlations and Precision Control 95
Applying Correlations in Risk Simulator 96
The Effects of Correlations in Monte Carlo Simulation 96
Tornado and Sensitivity Tools in Simulation 98
Sensitivity Analysis 104
Distributional Fitting: Single Variable and Multiple Variables 108
Bootstrap Simulation 110
Data Extraction, Saving Simulation Results, and Generating Reports 115
Regression and Forecasting Diagnostic Tool 116
Statistical Analysis Tool 122
Distributional Analysis Tool 127
CHAPTER 5: Analytical Forecasting and Cash Flow Projections 132
Advanced Analytical Forecasting with Risk Simulator 133
Different Types of Forecasting Techniques 133
Running the Forecasting Tool in Risk Simulator 135
Time-series Analysis 135
Multivariate Regression 138
Stochastic Forecasting 140
Nonlinear Extrapolation 145
Box-Jenkins ARIMA Advanced Time Series 147
\u008dSensitivity沤 Financial Forecasting 151
CHAPTER 6: Using Risk Simulator Optimization Procedures and Basel II Modeling Toolkit\u2019s Corporate Valuation Model 158
Mini Case 159
Risk Simulator Optimization Procedures 162
Risk Simulator Optimization Procedures Volatility and Optimization 166
CHAPTER 7: Analytical Techniques for Modeling Probability of Default, Loss Given Default, Economic Capital, Value at Risk, Portfolio Optimization, Hurdle Rates, and Rates of Return 176
Probability of Default 177
Loss Given Default and Expected Losses 183
Economic Capital and Value at Risk 185
Hurdle Rates and Required Rate of Return 197
CHAPTER 8: Portfolio Optimization 200
What Is an Optimization Model? 201
The Traveling Financial Planner 202
The Language of Optimization 203
Optimization Procedures 203
CHAPTER 9: Loan Pricing and Pricing Model Construction 216
Loan Pricing Models 216
Stochastic Net Borrowed Funds Pricing Model 217
Input Screen 217
Output Screen and Yield Calculation 223
Moving from Deterministic Pricing to Stochastic Pricing Solution 225
CHAPTER 10: Banker\u2019s Primer on Shareholder Value 230
Methods to Determine Value 231
Valuation Software 241
CHAPTER 11: Banker\u2019s Guide: Valuation Appraisal of Business Clients 242
Bank Loans and Other Financing 242
Valuation Appraisals\u201eDocuments and Information 244
Valuation Appraisal Outline 250
Valuation Appraisal Toolkit 254
CHAPTER 12: Constructing Industry-Specific Credit Rating Systems 258
The Structure of a Credit Risk Grading System 261
Risk Rating Computer Tutorial for Risk Rating Model.xls 262
Facility Grades 270
Building Industry-Specific/Risk-Specific Corporate Risk Rating Models 279
CHAPTER 13: Building Integrated Exposure Systems 286
Strategic Planning for the Loan Portfolio 287
GES and Loan Concentrations 292
GES and Assessment of Capital Adequacy 293
Liquidity Concerns 294
Customer Relationship and Marketing 294
GES and Disclosure to Outsiders 294
Exception Reports 295
Regulatory Reporting and GES 295
GES and Reports to the Board of Directors 296
Cross-Border Exposure Reporting 297
Data Architecture 299
Conclusion 304
CHAPTER 14: Credit Risk Rating and Debt Analysis (Credit Premium and Debt Options) 306
Illustrative Example: Credit Analysis\u201eCredit Premium 306
Illustrative Example: Credit Analysis\u201eCredit Risk Analysis and Effects on Prices 307
Illustrative Example: Credit Analysis\u201eExternal Debt Ratings and Spread 307
Illustrative Example: Credit Analysis\u201eInternal Credit Risk Rating Model 309
Illustrative Example: Credit Analysis\u201eProfit-Cost Analysis of New Credit 310
Illustrative Example: Debt Analysis\u201e Asset-Equity Parity Model 311
Illustrative Example: Debt Analysis\u201eCox Model on Price and Yield of Risky Debt with Mean Reverting Rates 312
Illustrative Example: Debt Analysis\u201eDebt Repayment and Amortization 313
Illustrative Example: Debt Analysis\u201eMerton Price of Risky Debt with Stochastic Asset and Interest 316
Illustrative Example: Debt Analysis\u201eVasicek Debt Option Valuation 317
Illustrative Example: Debt Analysis\u201eVasicek Price and Yield of Risky Debt 318
CHAPTER 15: Interest Rate Risk, Foreign Exchange Risk, Volatility Estimation, Risk Hedging, Yield Curve Forecasting, and Advanced Forecasting Techniques 320
Illustrative Example: Risk Analysis\u201eInterest Rate Risk 320
Illustrative Example: Risk Analysis\u201ePortfolio Risk Return Profiles 322
Illustrative Example: Risk Hedging\u201eDelta-Gamma Hedging 323
Illustrative Example: Risk Hedging\u201eDelta Hedging 324
Illustrative Example: Risk Hedging\u201eEffects of Fixed versus Floating Rates (Swaps) 325
Illustrative Example: Risk Hedging\u201eForeign Exchange Cash Flow Model 325
Illustrative Example: Risk Hedging\u201eHedging Foreign Exchange Exposure 328
Illustrative Example: Volatility\u201eImplied Volatility 330
Illustrative Example: Volatility\u201eVolatility Computations 330
Illustrative Example: Yield Curve\u201eCIR Model 338
Illustrative Example: Yield Curve\u201eCurve Interpolation BIM Model 339
Illustrative Example: Yield Curve\u201eCurve Spline Interpolation and Extrapolation Model 340
Illustrative Example: Yield Curve\u201eForward Rates from Spot Rates 341
Illustrative Example: Yield Curve\u201eTerm Structure of Volatility 342
Illustrative Example: Yield Curve\u201eU.S. Treasury Risk-free Rates 342
Illustrative Example: Yield Curve\u201eVasicek Model 345
Illustrative Example: Stochastic Forecasting of Interest Rates and Stock Prices 348
Illustrative Example: Econometric Forecasting using Box-Jenkins ARIMA 350
Illustrative Example: Time-Series Forecasting 351
CHAPTER 16: Exotic Options and Credit Derivatives 356
Illustrative Example: Exotic Options\u201eAccruals on Basket of Assets 358
Illustrative Example: Exotic Options\u201eAmerican Call Option on Foreign Exchange 359
Illustrative Example: Exotic Options\u201eBarrier Options 360
Illustrative Example: Exotic Options\u201eBinary Digital Options 361
Illustrative Example: Exotic Options\u201eCommodity Options 362
Illustrative Example: Exotic Options\u201eCurrency (Foreign Exchange) Options 363
Illustrative Example: Exotic Options\u201eExtreme Spreads Option 364
Illustrative Example: Exotic Options\u201eForeign Equity Linked Foreign Exchange Options in Domestic Currency 365
Illustrative Example: Exotic Options\u201eForeign Equity Struck in Domestic Currency 366
Illustrative Example: Exotic Options\u201eForeign Equity with Fixed Exchange Rate 366
Illustrative Example: Exotic Options\u201ePerpetual Options 367
Illustrative Example: Exotic Options\u201eRange Accruals (Fairway Options) 367
Illustrative Example: Options Analysis\u201eBinary Digital Instruments 368
Illustrative Example: Options Analysis\u201eOptions Trading Strategies 375
Illustrative Example: Options Analysis\u201eFive Plain Vanilla Options 378
Appendix 1: Getting Started with Real Options SLS Software Application on Modeling Customizable Exotic and Real Options 386
Single-Asset and Single-Phased Module 388
Multiple-Asset or Multiple-Phased SLS Module 395
Multinomial SLS Module 396
SLS Excel Solution Module 399
SLS Excel Functions Module 400
SLS Excel Lattice Maker Module 402
Appendix 2: Measuring Default Probability: A Practical Approach 405
Estimate Asset Value and Volatility 406
Calculate the Distance-to-Default 409
Calculate the Default Probability 410
Appendix 3: Server Based Applications for Running Data Intensive Basel II Credit and Market Risk Models 412
System Architecture 413
Rov Risk Modeler 414
Rov Risk Valuator 422
Index 426
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