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up in the credit crunch have underlined is the major impact of credit risk and – by implication – credit risk management on the wellbeing and profitability of business-es. Being able to manage this risk is a key requirement for any lending decision. This is well understood in theory – if not always in practice – by banks and other lending
We provide a comprehensive framework to manage credit risk, intro-ducing one of the four essential steps in each part of the book. This book is based on our professional experience and also on our experience of teaching credit risk management to graduate students and finance professionals. Next, we provide an overview of each part. Preface
26 lip 2023 · Introduction to Credit Risk focuses on analysis of credit risk, derivatives, equity investments, portfolio management, quantitative methods, and risk management. In terms of application, this book can be used as an important tool to explain how to generate data rows of expected exposure to counterparty credit risk.
The use of credit risk models offers banks a framework for examining this risk in a timely manner, centralising data on global exposures and analysing marginal and absolute contributions to risk.
The goal of credit risk management is to maximise a bank’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Banks need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credits or transactions.
Credit risk, or the risk that money owed is not repaid, has been prevalent in banking history. It is a principal and perhaps the most important risk type that has been present in finance, commerce and trade transactions from ancient cultures till today.
Credit risk is most simply defined as the potential that a borrower/counter party will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maintain credit risk exposure within targeted limits so that the bank can maximize risk adjusted return.
