Ebook: Concentration Risk in Credit Portfolios

Modeling and management of credit risk are the main topics within banks and other lending institutions. Historical experience shows that, in particular, concentration of risk in credit portfolios has been one of the major causes of bank distress. Therefore, concentration risk is highly relevant to anyone who wants to go beyond the very basic portfolio credit risk models.

The book gives an introduction to credit risk modeling with the aim to measure concentration risks in credit portfolios. Taking the basic principles of credit risk in general as a starting point, several industry models are studied. These allow banks to compute a probability distribution of credit losses at the portfolio level. Besides these industry models the Internal Ratings Based model, on which Basel II is based, is treated.

On the basis of these models various methods for the quantification of name and sector concentration risk and the treatment of default contagion are discussed. The book reflects current research in these areas from both an academic and a supervisory perspective

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Modeling and management of credit risk are the main topics within banks and other lending institutions. Historical experience shows that, in particular, concentration of risk in credit portfolios has been one of the major causes of bank distress. Therefore, concentration risk is highly relevant to anyone who wants to go beyond the very basic portfolio credit risk models.

The book gives an introduction to credit risk modeling with the aim to measure concentration risks in credit portfolios. Taking the basic principles of credit risk in general as a starting point, several industry models are studied. These allow banks to compute a probability distribution of credit losses at the portfolio level. Besides these industry models the Internal Ratings Based model, on which Basel II is based, is treated.

On the basis of these models various methods for the quantification of name and sector concentration risk and the treatment of default contagion are discussed. The book reflects current research in these areas from both an academic and a supervisory perspective

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Modeling and management of credit risk are the main topics within banks and other lending institutions. Historical experience shows that, in particular, concentration of risk in credit portfolios has been one of the major causes of bank distress. Therefore, concentration risk is highly relevant to anyone who wants to go beyond the very basic portfolio credit risk models.

The book gives an introduction to credit risk modeling with the aim to measure concentration risks in credit portfolios. Taking the basic principles of credit risk in general as a starting point, several industry models are studied. These allow banks to compute a probability distribution of credit losses at the portfolio level. Besides these industry models the Internal Ratings Based model, on which Basel II is based, is treated.

On the basis of these models various methods for the quantification of name and sector concentration risk and the treatment of default contagion are discussed. The book reflects current research in these areas from both an academic and a supervisory perspective

Content:
Front Matter....Pages I-XVII
Front Matter....Pages 1-1
Risk Measurement....Pages 3-7
Modeling Credit Risk....Pages 9-18
The Merton Model....Pages 19-30
The Asymptotic Single Risk Factor Model....Pages 31-42
Mixture Models....Pages 43-51
The CreditRisk+ Model....Pages 53-60
Front Matter....Pages 61-61
Introduction....Pages 63-66
Ad-Hoc Measures of Concentration....Pages 67-73
Name Concentration....Pages 75-106
Sector Concentration....Pages 107-129
Empirical Studies on Concentration Risk....Pages 131-148
Front Matter....Pages 149-149
Introduction....Pages 151-154
Empirical Studies on Default Contagion....Pages 155-164
Models Based on Copulas....Pages 165-171
A Voter Model for Credit Contagion....Pages 173-195
Equilibrium Models....Pages 197-209
Back Matter....Pages 211-225

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Modeling and management of credit risk are the main topics within banks and other lending institutions. Historical experience shows that, in particular, concentration of risk in credit portfolios has been one of the major causes of bank distress. Therefore, concentration risk is highly relevant to anyone who wants to go beyond the very basic portfolio credit risk models.

The book gives an introduction to credit risk modeling with the aim to measure concentration risks in credit portfolios. Taking the basic principles of credit risk in general as a starting point, several industry models are studied. These allow banks to compute a probability distribution of credit losses at the portfolio level. Besides these industry models the Internal Ratings Based model, on which Basel II is based, is treated.

On the basis of these models various methods for the quantification of name and sector concentration risk and the treatment of default contagion are discussed. The book reflects current research in these areas from both an academic and a supervisory perspective

Content:
Front Matter....Pages I-XVII
Front Matter....Pages 1-1
Risk Measurement....Pages 3-7
Modeling Credit Risk....Pages 9-18
The Merton Model....Pages 19-30
The Asymptotic Single Risk Factor Model....Pages 31-42
Mixture Models....Pages 43-51
The CreditRisk+ Model....Pages 53-60
Front Matter....Pages 61-61
Introduction....Pages 63-66
Ad-Hoc Measures of Concentration....Pages 67-73
Name Concentration....Pages 75-106
Sector Concentration....Pages 107-129
Empirical Studies on Concentration Risk....Pages 131-148
Front Matter....Pages 149-149
Introduction....Pages 151-154
Empirical Studies on Default Contagion....Pages 155-164
Models Based on Copulas....Pages 165-171
A Voter Model for Credit Contagion....Pages 173-195
Equilibrium Models....Pages 197-209
Back Matter....Pages 211-225
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