Credit Ratings: Methodologies, Rationale and Default Risk

Book description

• Provides a unique insight and overview into the many types of ratings that are in use today enabling you to compare and contrast the benefits as well as the potential pitfalls and peculiarities of the various systems
• Designed to help you implement or assess your own internal credit ratings systems with an overview of what is currently available and will alert you to possible problems with individual ratings systems
• Will help to ensure your internal credit rating systems are in line with current regulatory requirements by presenting background information on the new Basel ’Internal Ratings Based Approach’ as well as drawing upon relevant case studies that have been carried out on banks preparedness for this
• Presents an up-to-date discussion on how corporate scandals, such as Enron occurred, together with retrospective analysis of the behaviour of public ratings to them
• Discusses the possible flaws associated with the dependence on external ratings in particular situations
• Multi-contributor format edited by the best-selling author and practitioner Michael K. Ong

Book details

ISBN

9781899332694

Publish date

1 Oct 2002

Format

Size

A4

Editor biography

Michael K. Ong

Michael K. Ong is professor of finance and director of the finance program at The Stuart Graduate School of Business, Illinois Institute of Technology. He is also executive director of the Center for Financial Markets. Until recently, Dr Ong was executive vice president and chief risk officer for Credit Agricole Indosuez in New York. He had enterprise-wide responsibility for all risk management functions for corporate banking, merchant banking, asset management, capital markets activities, and the Carr Futures Group. Dr Ong received a BS degree in physics, MS degree in applied mathematics, and a PhD degree in applied mathematics from the State University of New York at Stony Brook.

Table of contents

CONTENTS

Rating credits

Introduction

Michael Ong

1. The A to Z of Standard and Poor’s Ratings

Chris Dinwoodie of Standard and Poor’s

2. Historical Corporate Rating Migration, Default and Recovery Rates

David Hamilton of Moody’s Investors Service

3. Cyclical Effects in Credit Risk Ratings and Default Risk

Linda Allen of Zicklin School of Business, Baruch College, City University of New York and Anthony Saunders of Stern School of Business, New York University

Rating agencies

Introduction

Michael Ong

4. An Analysis of the Credit Rating Industry

Lawrence J. White of Stern School of Business, New York University

5. The Meaning of Agency Ratings: A Behavioural Model of Rating Assignment

Sean C. Keenan and Jorge R. Sobehart of CitiGroup Risk Architecture

6. Hybrid Contingent Claims Models: A Practical Approach to Modelling Default Risk

Jorge R. Sobehart and Sean C. Keenan of CitiGroup Risk Architecture

Credit scoring techniques

Introduction

Michael Ong

7. Revisiting Credit Scoring Models in a Basel II Environment

Edward I. Altman of Stern School of Business, New York University

8. Credit Scoring for Corporate Debt

Eric Falkenstein of Deephaven Capital Management

9. Scoring and Validating Techniques for Credit Risk Rating Systems

Sebastian G. Fritz, Lars Popken and Christian Wagner of Credit Risk Management, Risk Analytics and Instruments, Deutsche Bank AG

10. Replicating Agency Ratings through Multinomial Scoring Models

Andrea Resti of Bergamo University

11. Capital Ratios and Credit Ratings as Predictors of Bank Failures

Arturo Estrella and Stavros Peristiani of Federal Reserve Bank of New York and Sangkyun Park of Office of Management and Budget

Regulatory issues on credit ratings

Introduction

Michael Ong

12. Regulatory use of Credit Ratings: Implications for Banks, Supervisors and Markets.

Barbara C. Matthews of Institute of International Finance

13. Regulatory Capital Based on Bank Internal Ratings of Credit Risk

Jeffrey A. Brown of Risk Analytics Division, Office of the Comptroller of the Currency

14. Supervisory and Regulatory Concerns Regarding Bank Internal Rating Systems

Jose A. Lopez of Federal Reserve Bank of San Francisco and Marc R. Saidenberg of Federal Reserve Bank of New York

15. Regulatory Issues on Credit Ratings

David M. Rowe, Dean Jovic and Marcel Beutler of SunGard Trading and Risk Systems

Internal rating systems of banks

Introduction

Michael Ong

16. Credit Culture

Dev Strischek of SunTrust Bank Inc

17. Internal Risk Rating Systems

Michel Crouhy, Dan Galai and Bob Mark of CIBC

18. The New Capital Accord and Internal Bank Ratings

Donald R. van Deventer and Jaqueline Outram of Kamakura Corporation

19. Designing and Implementing Effective Credit Rating Systems

Thomas Garside and Jonathon Greenman of Oliver, Wyman & Company

20. Preparing for the Internal Ratings-Based Approach

Andrea Szczesny and Ralf Ewert of Johann Wolfgang Goethe University, Frankfurt

21. Some Evidence on the Consistency of Banks’ Internal Ratings

Mark Carey of Federal Reserve Board

Credit ratings of asset securitisations

Introduction

Michael Ong

22. Measuring Portfolio Credit Risk with Default Experience Statistic (DES)

Arthur M. Berd of Lehman Brothers

23. EL and DP Approaches to Rating CDOs and the Scope for “Ratings Shopping“

William Perraudin and Vladislav Peretyatkin of Birkbeck, University of London

24. Rating Based on Credit Portfolio Models

Ludger Overbeck and Hans Lotter of Deutsche Bank AG

Testimonials

“Contains a wealth of useful ideas.“

John Hull, Joseph L. Rotman School of Management