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Sunday September 5, 2010

Credit Risk Measurement
by Anthony Saunders, Linda Allen

Business/Strategy (click here to view other books in this category)

Credit Risk Measurement January 0001

Anthony Saunders, Linda Allen

Wiley -

9780471219101

****

Price

10,300.00

$79.23

On December 2, 2001, Enron Corporation filed for Chapter 1 I bankruptcy protection. At an asset value of $49.53 billion, this was the largest bankruptcy filing in U.S. history to date. At the time, many of the world's most prominegt financial institutions had billions of dollars of credit risk' exposure to Enron. Adoption of early warning systems that' accurately measure credit risk exposure might have alerted these investors in time for them to take action to manage their risk exposure. That is the role of the credit measurement models surveyed in this book. Indeed, you can see at a glance that several of these models KMV's EDF score and Altman's L"-Score-predicted significant increases in Enron's credit risk exposure long before the bankruptcy filing. A recent revolution has been brewing in risk measurement and risk management. In the past two years, the art of credit risk measurement has progressed far beyond anyone's expectations-many models are already entering their second generation. Contrary to its relatively dull and routine history, this new generation of credit risk modeling has seen the emergence of new technologies and ideas. The search by the Bank for International Settlements (BIS) to design a new set of international bank capital regulations, scheduled for adoption in 2005, hinges on details of model structure and data availability. Much of this highly technical debate has been inaccessible to the interested practitioner, student, economist, or regulator-until now. In the fully updated Credit Risk Measurement: New Approaches to Value at Risk and Other Paradigms, Second Edition, Anthony Saunders and Linda Allen discuss all of the latest credit risk measurement and modeling techniques. Simplifying many of the technical and analytical details surrounding these models, Saunders and Allen concentrate on the underlying economics and their level of economic intuition to objectively evaluate the new models. Saunders and Allen examine how these new models approach the evaluation of individual borrower and portfolio credit risk exposure, as well as the development of derivative contracts to manage credit risk exposure. The alternative models include (among others): o Loans as options: the KMV and Moody's models o Intensity-based models: KPMG's Loan Analysis System and Kamakura's Risk Manager o VAR models, including stress testing: CreditMetrics and Algorithmics' Mark-to-Future o The insurance approach: mortality models and CSFP Credit Risk Plus o RAROC models o The BIS proposals for the New Basel Capital Accord updated to 2002 The art and science of credit risk management is the single most important topic in finance today-from the 2002 BIS proposals to cutting-edge risk measurement models known as intensity-based models. To get a jump on these new concepts and tools, you need the best guidance available. With its comprehensive coverage, summary, and comparison of new approaches, Credit Risk Measurement, Second Edition gives you the best opportunity to do so. With clear explanations of often complex material, Credit Risk Measurement, Second Edition is an indispensable resource for bankers, academics and students, economists, and regulators. ANTHONY SAUNDERS is John M. Schiff Professor of Finance and Chair of the Department of Finance at the Stern School of Business at New York University. He holds positions on the Board of Academic Consultants of the Federal Reserve Board of Governors and the Council of Research Advisors for the Federal National Mortgage Association. He is an editor of the Journal of Banking and Finance and Financial Markets, Instruments, and institutions LINDA ALLEN is Professor of Finance at the Zicklin School of Business at Baruch College, CUNY, and Adjunct Professor of Finance at the Stern School of Business at New York University. She is also the author of Capital Markets and Institutions: A Global View (Wiley). She is an associate editor of the Journal of Banking and Finance, Journal of Economics and Business, Multinational Finance Journal, Journal of Multinational Financial Management, and The Financier. locket Design: Paul McCarthy