Active Credit Portfolio Management in Practice by Jeffrey R. Bohn PDF

By Jeffrey R. Bohn

Cutting-edge suggestions and instruments had to facilitate powerful credits portfolio administration and strong quantitative credits research

choked with in-depth insights and specialist recommendation, lively credits Portfolio administration in perform serves as a finished creation to either the idea and real-world perform of credits portfolio administration. The authors have written a textual content that's technical adequate either by way of history and implementation to hide what practitioners and researchers want for truly utilizing these kind of possibility administration instruments in huge companies yet which even as, avoids technical proofs in want of genuine applications.  all through this booklet, readers should be brought to the theoretical foundations of this self-discipline, and know about structural, reduced-form, and econometric versions effectively utilized in the industry at the present time. The ebook is filled with hands-on examples and anecdotes. concept is illustrated with functional program. The authors' site offers extra software program instruments within the type of Excel spreadsheets, Matlab code and S-Plus code. every one part of the publication concludes with evaluation questions designed to spark additional dialogue and mirrored image at the ideas provided.

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Extra resources for Active Credit Portfolio Management in Practice

Sample text

What can substantially muddy this modeling challenge is the possibility of a liquidity-based default or liquidity-based change in security value. In a circumstance in which market liquidity has dried up, a firm with sufficient market value may still default because it cannot roll over its short-term debt as it comes due. The claims represented in the issued loans and bonds of a particular obligor may still relate to that obligor’s valuable assets, but the absence of liquidity in the market prevents a portfolio manager or credit trader from finding new financing or selling positions in its portfolio to cover existing claims.

Deposit banking developed in response to the need for assignment of third-party debt among strangers. Since the bank became the counterparty for multiple transactions, it could net a large number of payments without resorting to final cash settlement. This set of circumstances enabled preindustrial banks to offer a solution to the endemic problem of liquidity risk faced by merchants, namely a short-term lack of cash preventing completion of a particular transaction. Since depositors in the bank found it convenient to leave their money with the banker so that settlement of transactions could be done without having to lug around actual coins, the bank now had a store of deposits to use as the basis of an overdraft loan.

This set of circumstances enabled preindustrial banks to offer a solution to the endemic problem of liquidity risk faced by merchants, namely a short-term lack of cash preventing completion of a particular transaction. Since depositors in the bank found it convenient to leave their money with the banker so that settlement of transactions could be done without having to lug around actual coins, the bank now had a store of deposits to use as the basis of an overdraft loan. The bankers discovered that they could extend credit beyond the quantity of actual coins or gold on deposit since most depositors did not demand all of their deposits most of the time.

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