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by Jeffrey R. Bohn (Author), Roger M. Stein (Author)
State-of-the-art techniques and tools needed to facilitate effective credit portfolio management and robust quantitative credit analysis
Filled with in-depth insights and expert advice, Active Credit Portfolio Management in Practice serves as a comprehensive introduction to both the theory and real-world practice of credit portfolio management. The authors have written a text that is technical enough both in terms of background and implementation to cover what practitioners and researchers need for actually applying these types of risk management tools in large organizations but which at the same time, avoids technical proofs in favor of real applications. Throughout this book, readers will be introduced to the theoretical foundations of this discipline, and learn about structural, reduced-form, and econometric models successfully used in the market today. The book is full of hands-on examples and anecdotes. Theory is illustrated with practical application. The authors' Website provides additional software tools in the form of Excel spreadsheets, Matlab code and S-Plus code. Each section of the book concludes with review questions designed to spark further discussion and reflection on the concepts presented.
Back Jacket
Despite numerous advances in the world of credit--ranging from new methods for analyzing, managing, and trading credit risk to innovations in the structure of and markets for bank loans, bonds, and credit derivatives--there is still much room for improvement.
With almost twenty years of experience in the credit arena, authors Jeffrey Bohn and Roger Stein are well versed in both the theory and practice of active credit portfolio management (ACPM). The models and systems their teams have developed are in use in hundreds of large and small financial institutions worldwide. In this detailed field guide, they lay out the steps for actually implementing approaches to ACPM in today's dynamic business environment and discuss how financial institutions of all sizes can benefit from more prudent use of quantitative credit and portfolio management.
Filled with in-depth insights and expert advice, Active Credit Portfolio Management in Practice opens with an informative introduction to credit analysis, credit portfolio management, and a number of organizational issues associated with ACPM in practice. The authors then move on to discuss a variety of probability of default (PD) and valuation models used in credit portfolio management systems--including structural, econometric, and reduced-form--as well as exploring some practical approaches to modeling loss given default (LGD). And since differentiating the usefulness of models is key to effective system implementation, Bohn and Stein have dedicated an entire chapter to model validation.
They then demonstrate how all of these pieces come together as they address practical strategies for credit portfolio modeling by focusing on estimating correlation and credit loss distributions. The final chapter puts all of these topics in perspective, by presenting a case study of a bank implementing the tools to build an ACPM and economic capital allocation function. This case study is drawn from a number of the actual implementations Bohn and Stein have participated in, and highlights the range of issues that often go beyond just choosing models when rolling out these systems in practice.
The book also contains supplemental material to complement it and facilitate its use for either classroom instruction or self-study. In particular, each chapter ends with review questions and exercises. Additional information--including source code--is located on the authors' companion Web site: www.creditrisklib.com.
Financial institutions without the infrastructure to measure, monitor, and manage their credit exposure run the risk of sudden and large credit losses. Active Credit Portfolio Management in Practice presents a framework for understanding and selectively implementing effective credit risk management and credit portfolio management systems--one which can help organizations better position themselves in this evolving environment.
Author Biography
JEFFREY R. BOHN, PHD, leads the Financial Strategies group at Shinsei Bank in Tokyo. Previously, he led Moody's KMV's (MKMV's) Global Research group and MKMV's Credit Strategies group. After Moody's acquired KMV, he and Roger Stein coheaded MKMV's research and product development.
ROGER M. STEIN, PHD, is Group Managing Director of the newly formed Quantitative Research and Analytics group at Moody's Investors Service in New York. Previously, he was head of research for Moody's Risk Management Services. After Moody's acquired KMV, he and Jeffrey Bohn co-headed MKMV's research and product development.
