1st Edition
by Ciby Joseph (Author)
Credit is essential in the modern
world and creates wealth, provided it is used wisely. The Global Credit
Crisis during 2008/2009 has shown that sound understanding of underlying
credit risk is crucial. If credit freezes, almost every activity in the
economy is affected. The best way to utilize credit and get results is
to understand credit risk.
Advanced Credit Risk Analysis and Management
helps the reader to understand the various nuances of credit risk. It
discusses various techniques to measure, analyze and manage credit risk
for both lenders and borrowers. The book begins by defining what credit
is and its advantages and disadvantages, the causes of credit risk, a
brief historical overview of credit risk analysis and the strategic
importance of credit risk in institutions that rely on claims or
debtors. The book then details various techniques to study the entity
level credit risks, including portfolio level credit risks.
Authored
by a credit expert with two decades of experience in corporate finance
and corporate credit risk, the book discusses the macroeconomic,
industry and financial analysis for the study of credit risk. It covers
credit risk grading and explains concepts including PD, EAD and LGD. It
also highlights the distinction with equity risks and touches on credit
risk pricing and the importance of credit risk in Basel Accords I, II
and III. The two most common credit risks, project finance credit risk
and working capital credit risk, are covered in detail with
illustrations. The role of diversification and credit derivatives in
credit portfolio management is considered. It also reflects on how the
credit crisis develops in an economy by referring to the bubble
formation. The book links with the 2008/2009 credit crisis and carries
out an interesting discussion on how the credit crisis may have been
avoided by following the fundamentals or principles of credit risk
analysis and management.
The book is essential for both lenders
and borrowers. Containing case studies adapted from real life examples
and exercises, this important text is practical, topical and
challenging. It is useful for a wide spectrum of academics and
practitioners in credit risk and anyone interested in commercial and
corporate credit and related products.