The global financial crisis has led to an unprecedented and unexpected increase of impairment and loss rates for securitisations (also known as structured finance transactions). The disappointment of investors manifested in the criticism of models applied for measuring credit portfolio risk in relation to securitisations and derivatives. Examples for current risk models are VECTOR from Fitch rating agency, CDOROM from Moody’s rating agency and CDO Evaluator from Standard and Poor’s rating agency. This has led to widespread acknowledgement that credit risk management needs a major overhaul in order to meet the needs of the marketplace and the regulators. Credit Securitisations and Derivatives is a one-stop resource presenting the very latest thinking and developments in the field of credit risk. Written by leading thinkers from academia, the industry and the regulatory environment, the book tackles areas such as business cycles; correlation modelling and interactions between financial markets, institutions and instruments in relation to securitisations and credit derivatives; credit portfolio risk; credit portfolio risk tranching; credit ratings for securitisations; counterparty credit risk and clearing of derivatives contracts and liquidity risk. As well as a thorough analysis of the existing models used in the industry, the book will also draw on real life cases to illustrate model performance under different parameters and the impact that using the wrong risk measures can have. Credit Securitisations and Derivatives will enable quantitative analysts to better improve their risk models, risk managers to better evaluate the performance of existing models and understand future model needs, and finally it will provide regulators with an overview of the risks inherent in securitisations and derivatives. Table of Contents: Introduction Credit portfolio risk measurement Credit portfolio risk tranching Credit ratings for securitisations Mortgage portfolio risk models Collateralised debt obligations Counterparty credit risk and clearing of derivatives contracts Liquidity risk in relation to securitisations and derivatives Accounting and regulatory capital (Basel II) issues in relation to securitisation Outlook: future financial markets, institutions and instruments
Book Details:
- Author: Daniel Rsch
- ISBN: 9781118818503
- Year Published: 2013
- Pages: 464
- BISAC: BUS027000, BUSINESS & ECONOMICS/Finance
About the Book and Topic:
The global financial crisis has led to an unprecedented and unexpected increase of impairment and loss rates for securitisations (also known as structured finance transactions). The disappointment of investors manifested in the criticism of models applied for measuring credit portfolio risk in relation to securitisations and derivatives. Examples for current risk models are VECTOR from Fitch rating agency, CDOROM from Moody’s rating agency and CDO Evaluator from Standard and Poor’s rating agency. This has led to widespread acknowledgement that credit risk management needs a major overhaul in order to meet the needs of the marketplace and the regulators. Credit Securitisations and Derivatives is a one-stop resource presenting the very latest thinking and developments in the field of credit risk. Written by leading thinkers from academia, the industry and the regulatory environment, the book tackles areas such as business cycles; correlation modelling and interactions between financial markets, institutions and instruments in relation to securitisations and credit derivatives; credit portfolio risk; credit portfolio risk tranching; credit ratings for securitisations; counterparty credit risk and clearing of derivatives contracts and liquidity risk. As well as a thorough analysis of the existing models used in the industry, the book will also draw on real life cases to illustrate model performance under different parameters and the impact that using the wrong risk measures can have. Credit Securitisations and Derivatives will enable quantitative analysts to better improve their risk models, risk managers to better evaluate the performance of existing models and understand future model needs, and finally it will provide regulators with an overview of the risks inherent in securitisations and derivatives. Table of Contents: Introduction Credit portfolio risk measurement Credit portfolio risk tranching Credit ratings for securitisations Mortgage portfolio risk models Collateralised debt obligations Counterparty credit risk and clearing of derivatives contracts Liquidity risk in relation to securitisations and derivatives Accounting and regulatory capital (Basel II) issues in relation to securitisation Outlook: future financial markets, institutions and instruments
Securitisations involve the sale of assets into bankruptcy – remote special purpose vehicles, which are funded by investors of different seniorities (tranches). Based on the nature of the securitised asset portfolios, important transaction types include asset-backed securities, collateralized debt obligations, home equity loan-backed securities and mortgage-backed securities. Credit derivatives are generally unfunded contracts with structurally similar elements and appraisal challenges as securitisations. The current market size is approximately $40 billion globally and exceeds many other asset classes.
AUTHOR EXPERTISE both editors have a long-term track record in the area of credit portfolio securitisations and derivatives. They collaborate with numerous financial industry firms, national regulators and universities. TOPICAL while practitioners, regulators and academics agree that the credit markets will once again become a force to be reckoned with, they also agree that credit portfolio securitisations and derivatives as an area requires a massive overhaul of current best practice. MARKET SIZE despite the impact of the crisis, the market size for credit derivatives is estimated at $40bn and set to grow.
About the Author
Professor Daniel Rösch (Hannover, Germany) is Professor of Banking and Finance at the Institute of Banking and Finance, Leibniz Universität Hannover. He received a Ph.D. from the University of Regensburg. His work covers a broad range in asset pricing and empirical finance, and has published numerous articles on risk management, credit risk, banking, and quantitative finance in leading international journals, and has organized numerous executive training courses on these topics. Dr. Harald Scheule (Melbourne, Australia) teaches Banking and Finance at The University of Melbourne. He has worked globally as a consultant on credit risk, structured finance and securitisation projects for banks, insurance and other financial service companies and maintains strong research relationships with Australian, German and Hong Kong regulators for financial institutions. He has extensively published and organized executive training courses in his discipline.