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

Book 9781899332694 / EBook 9781908823045

Publish date

1 Oct 2002

Format

Paperback

Size

230mm x 280mm

Editor biography

Michael K. Ong

Dr. Michael K. Ong is currently Professor of Finance at the Stuart School of Business, Illinois Institute of Technology.  He was formerly the Director of the Finance Program and the Executive Director of the Center for Financial Markets. Prior to his retirement from the financial industry, Professor Ong was Executive Vice President and Chief Risk Officer for Credit Agricole Indosuez in New York.  He has enterprise-wide responsibility for all risk management functions for corporate banking, merchant banking, asset management, capital markets activities, and the brokerage division.  He was a member of the Executive Committee.  Before that, he was Head of Enterprise Risk Management for ABN-AMRO Bank, responsible for management information and decision support function for the Executive Committee regarding enterprise-wide market, credit, operational, and liquidity risk, as well as RAROC, ROE, and related optimization models.  Prior to that, Dr. Ong was Head of Corporate Research Unit for First Chicago NBD Corporation. The unit supports the Bank in its global enterprise-wide risk management function – market and credit risk analyses and the allocation of economic capital – and oversees the quantitative research units of the trading areas.  Earlier on, he served as an assistant professor of mathematics at Bowdoin College for seven years with his research specialty in mathematical physics.

He is a member of the Editorial Board of the Journal of Financial Regulation and Compliance, the Journal of Credit Risk, and the Journal of Risk Management for Financial Institutions.  He was the founding editor and Editor-in-Chief of the Journal of Credit Risk, and was on the editorial board of the Journal of RISK and The RMA Journal.  

He is author or editor of the following best-selling books: Internal Credit Risk Models – Capital Allocation and Performance Measurement (Risk Books,1999); Credit Ratings – Methodologies, Rationale and Default Risk (Risk Books, 2002); The Basel Handbook – A Guide for Practitioners (Risk Books, 2004); Risk Management – A Modern Perspective (Elsevier, 2006);The Basel Handbook, 2nd Ed. (Risk Books, 2007).  

Dr. Ong is widely recognized in the financial industry for his work on portfolio credit risk modelling, RAROC, economic capital allocation, operational risk, enterprise risk management, his very active involvement in regulatory issues, and his thoughtful candor on issues affecting the financial industry in general.  

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