Index. Cambridge University Press Managing Portfolio Credit: Risk in Banks Arindam Bandyopadhyay. Index.

Transcription

1 Accounting LGD, 154, 159 Accuracy ratio (AR), 125, 203 Advance bills (AB), 146, 148 Advanced internal rating based approach, 324 Adverse selection, 59, 23, 303 Agriculture Rating Model, AIRB (see Advanced internal rating based approach) Altman, 52 57, 59, 67 68, 152, 161, 209 Application scorecard, 68, 75, 81, 105 Area under curve (AUC), 210 Area under ROC, 79 Asset correlation, 5, 249, 251, , , 272, 324, Asset drift, Asset liability committee (ALCO), 15 Asset volatility, 85, 87, 89 90, 92, 103 Asymptotic single risk factor (ASRF), 330 Average risk contribution, 240 Back-testing, 22, 275 Bank failure, 101 Bank guarantee (BG), 146, Bank solvency, 98, 265 Bankruptcy, 7, 9, 55 57, 68, 94, 112, 178 Basel committee for banking supervision (BCBS), 18 Basel II IRB approach, 19, 38, 73, , 187, 222, 289, Basel II key principles, , 291 Basel II regulation, 32, 46, 187 Basel II standardized approach, 139, 163, , 322, , Basel III regulation, 11, 343, 348 Bayes theorem, 58 Bayesian probability, 125 Bayesian, 125 Behavioural scorecard, 68, 81 82, 105, 350 Benchmarking, 70, 104, 112, 196, 201, 215, 220, 255, 349 Beta distribution, LGD, Beta equity, 302 Bills discounted (BD), Bills purchased (BP), Binomial distribution, 237 Bivariate normal distribution, 257 Black and Scholes and Merton model (BSM), 84 85, 88, 90, 94, 209 Bluhm and Overbeck, 250 Borrower rating, 5, 36 37, 75, 123, 140, 149, 158, 163, 176, 262, 289, 337, 341 Borrower risk, 18, 24, 36, 63, 75, 81, 189, 258, 277 Brier Score, 73, 197, 217 Business cycle, 2, 51, 124, 158, 175, 221, , 226, , , 293, 299, 323

2 356 Business risk, 20, 30, 34, 45, 47 48, 276 Calibration, 21, 37, 80, 112, 125, , 201, , , 223, CAP (see Cumulative accuracy profile) Capital adequacy ratio, 9, 17, 254, 271, 291, 293, 294, 344, 347 Capital allocation, 20 21, 112, 180, 243, 276, 300, 302, , 330, 350 Capital asset pricing models (CAPM), 91, 302, 305 Capital buffer, 324, Capital charge, 112, 128, 231, 321, 344 Capital conservation buffer (CCB), Capital floor, 336 Capital management, 343, 351 Capital multiplier, 279, 288, 303, 305 Capital planning, 121, 343 Capital risk weighted assets ratio, 11 CAPM (see capital asset pricing) CAR (see Capital adequacy ratio) Cash credit (CC), Cash flow, 7, 30, 38 39, 46 47, 58, 85, , , CCF (see Credit Conversion Factor) CET1 (see Common equity tier 1) Chi-square test, 73, 175, , , 221 Chief Risk Officer (CRO), 15 Classification power, 53, 59, 200, 208 Cohort analysis, 112, 116, 119, 141 Collateral charge, 161 Collateral, 29, 70 Commercial real estate (CRE), 162, 322, 340 Common equity tier 1 (CET1), Concentration risk capital, 269, 271 Concentration risk, 3, 5, 124, 235, 245, 247, 255, 260, , , 269, 271 Core equity capital, 351 Counter cyclical buffer (CB), 299, 348 Counter cyclical capital buffer (CCCB), 346, 352 Counterparty risk, 43, 344 Country risk, 43, 171 Covenants, , 50, 100, 139, 143, 145, 180 CRAR (see Capital risk weighted assets ratio) CRAs (see credit rating agencies) Credit bureau, 68, 70, 72, 83, 105, 215 Credit conversion factor, 3, , 337 Credit cycle, 221, 231 Credit loss distribution, 236, 260, 279 Credit monitor, 51, 85 87, 94, 193 Credit rating agencies (CRAs) rating, 45, 47 Credit Rating Information Services of India Limited (CRISIL), 48 Credit risk drivers, 38, 223 Credit risk management committee (CRMC), Credit risk management department (CRMD), 14 15, 17, 21, 134 Credit risk mitigation, 320, 323, 342 Credit risk plus, 49, 143 Credit spread, 12 13, 93, 102, 153, 305 Credit value adjustment (CVA), 344 Credit VaR, , 284, , 299, 307

3 357 CRISIL, 31, 35, 48, 58, 60 62, 94, 96, 104, 113, , 129, 153, 253, 258, 260, 294, Cumulative accuracy profile, 73, 125, , 206 Cumulative probability of default (CPD), Data cleaning and sorting, 164 Data collection, 137 Data quality, 20, 230, 341 Decision tree, 31 33, 328 Default correlation, , Default definition, 47 Default point, 84 85, 89, 90, 92, 96, 101 Default weighted LGD, 178, 229 Disclosure, 324, 349 Discount rate, 155, , 172, 175, 180 Discounted LGD, Discriminatory power, 73, 79, 125, , 197, , , 215, Distance to default (DD), 84, 89 90, 92, 97 98, 101 Distribution fitting, 151 Downturn LGD, 178, 228 Drawing power, Early warning signal, 25, 41, 52, 57, 59 60, 64, 101, 134, 143, 149 ECAIs, roles, 46, 321 Economic capital, 7, 9, 11, 13, 18, 20, 68 69, 81, Economic LGD, , 159, 162, , 167, 172, 176 Economic profit, 301, 303, 310 Economic value added (EVA), 301 Education loan risks, 304 Effective maturity (M), 325, 333 EL (see Expected Loss) EL based HHI, 263 Enron case, Equity correlation, , 260 European Banking Association (EBA), 348 Ex-ante LGD, 169, 179 Ex-ante prediction, 181 Expected default frequency (EDF), 43, 84, 87, 90, 92, 94 Expected LGD, 36, 152 Expected loss, 26, 3, 45, 43, 83, 90, 138, 235, 237 Expected probability of default (EPD), 76, 80 Expert judgment systems, 32 Facility rating, 35 37, 170 FICO score, 186 Financial instruments, 167, 346 Financial stability report (FSR), 9 Fund based facilities, 147, Gini coefficient, 73, 188, , 201, , 210, 262, 264 Gordy, 250, 257, 330 Granularity, 100, 125, 219, 232, 263, Gross non performing assets (GNPA), 3, 9, 132 Guarantee, 30, 36, 40, 49, 70, 138, 150, 153 Gupton and Stein, 159, Hair cut, Hazard function, 102 Hirschman Herfindahl (HHI), 262 Historical data, 20, 27, 40, 130, 138, 158, 163, 180 Historical LGD, , 162, 167, 172 Homogeneous pool, 328 Housing loan rating model, 32, 203

4 358 Hybrid credit scoring models, Hypothecation, 147, 158 ICAAP (see Internal capital adequacy assessment process) Idiosyncratic risk, , 330 Industry default rates, 121, 158, 229 Infinitely granular portfolio, 227 Infrastructure rating, 107 Internal audit, Internal capital adequacy assessment process, 271, 289, 311, 342 Internal rating, 26, 31 33, 52, 59, 67, 104 Internal ratings based approach, , 325 Investment grade (IG), 49, 123 IRB (see Internal ratings-based approach) IRB challenges, 352 IRB road map, xxiii Issue rating, Joint default probability, 252, Judgmental rating model, xx K (see capital multiplier) Kendall s tau, 200 Kingfisher, 96 KMV model, 55, 57, 84 86, 90, 94, , 256 Kolmogorov-Smirnov (KS) test, 217 LDP (see Low default portfolio) Letter of credit (LC), 149 Leverage ratio, 57, 348 Leverage, 28 29, 46, 54 55, 57, 68, 104, 158 LGD (see Loss given default) LGD prediction, 176 LGD predictor model, 36, 159, , LIED (see Loss in the event of default) Liquidity risk, 42, 44 Liquidity, 67 Loan to value ratio, 162 Log normal distribution, 92 Logit model, 63 64, 103 Long run PD, 116, 130, 133, 227, 248, 253 Long run LGD, 176 Lorenz curve, 202, 262, Loss given default, 45, 90, Loss in the event of default, 157, 303 Low default portfolio, LTV (see loan to value ration) Mapping process, 33, 51, 225, 230 Marginal risk contribution (MRC), 266, 311 Market value of assets (MVA), 96 Markov, 112, 114 Master scale, 213 Maturity adjustment, 128, Maximum likelihood estimation, 172 MDA (see Multiple discriminant analysis) Mean square error (MSE), 196 Micro Finance Institute (MFI)s rating model, 42 Migration, MKMV (see KMV) MLE (see Maximum likelihood estimation) Model design, 188, 191, 230 Model development, , 194, 197, 200, 203 Model governance, Model stability, 221 Model validation, xxii, 125, 186 Moody s, 45, 49, 55, 84, 886, 102 Moral hazard, 97 Mortality analysis, 112, 125 Mortgage loans, 186, 351

5 359 Multinomial logistic regression, 48 Multiple discriminant analysis, 53, 72 Multivariate analysis, 72 NCAF (see New capital adequacy framework) New capital adequacy framework (NCAF), 318 Newton Raphson algorithm, 89 Non bank financial cos. (NBFCs), 266 Non fund based facilities, Non investment grade (NIG), 49, , 129 Non Performing Assets, 3, 6, 9, 187 Normal distribution, 8, 88, 90 94, 172, 330 NPA (see Non Performing Assets) Obligor rating, 36, 180 Off balance sheet exposures, 36, 180 One dimensional rating, 36 Other retail, 168, 328, 331 Over the counter derivatives (OTC), 177, 344, 349 Overdraft (OD), 147 Packing credit (PC), Payoff function, 86 Percentile, 80, 266, Pivot table, Pluto and Tasche, 125 Point in time (PIT) rating, 51 Pooled PD, Portfolio diversification, 5, 11, 117, 179 Portfolio optimization, Portfolio risk, , 293 Power curve, Present value, 85, 90, , Probability of default (PD), 25 26, 29, 36, Pro-cyclicality, 150, , , 324 Project finance (PF), Prudential limits, 12, 14, 18, 271, 299 Qualifying criteria, 213, 328 Qualifying revolving retail exposures (QRRE), 334 Qualitative factors, 27 28, 42, 46 Qualitative validation, Quantile function, Quantitative factors, 46, 74, 71, 77 Quantitative validation, , Rank correlation, 200 RAROC (see Risk adjusted return on capital) RARORAC (see Risk adjusted return on risk adjusted capital) Rating history, 117, 203, 246 Rating models, , 216, 221 Rating sheet, 32 RBI (see Reserve Bank of India) RCAP (see Regulatory consistency assessment programme) Receiver operating characteristic (ROC), Recovery rating, 49 50, 180 Recovery, , 178 Reduced form models, 32, Regression model, 31, 48, 57, 63, 151, 172, 175 Regulatory arbitrage, 323 Regulatory capital, Regulatory compliance, 6 7, 26, 262, 312 Regulatory consistency assessment programme, 348 Regulatory retail, 328 Required capital, 11, 291, Reserve Bank of India, 5, 19, 166, 289, , 344, 349 Residential mortgage, 331, 333, 335

6 360 Residential real estate (RRE), 169, 349, 340 Retail pooling, 328, 350 Retail scoring models, Return on equity (ROE), 301 Return on risk weighted assets (RORWA), 347 Revised standardized approach, 349 Revolving credit exposure, 331 Risk adjusted performance measurement (RAPM), 311 Risk adjusted return on capital (RAROC), 276, 299 Risk adjusted return on risk adjusted capital (RARORAC), 301 Risk appetite, 15, 284, Risk assessment model (RAM), 31 Risk based pricing, 7, 12 Risk capital, 11, Risk contribution, Risk differentiation, Risk factors, 75 Risk management department (RMD), 15 Risk modelling, 16, 20 Risk neutral EDF, 90 91, 96, 100 Risk reporting, 21 Risk vision, 7 Risk weight, 40 43, 149, 151, 321 Risk weighted assets (RWA), 9, 330, 339 RMD (see Risk management department) Robustness, , 221 RORWA (see Risk adjusted return on risk weighted assets) Scenario analysis, 90, Shareholder value, 112, 276, Significance, 79 Simulation methods, 280, 284 Size adjustment, 324, Skewness, 51, 266 Slippage, 268 Slope adjustment, 332 Small and medium enterprises (SME), 14, 41 Solvency, 53, 55 Solver, 89, 205 Sovereign, Spearman s rank correlation, 200 SREP (see Supervisory Review Process) Standard & Poor (S&P), 45, 49 Standard deviation, 46, 89, 90, 98 Standardized Approach, 19, 139 Statistical scoring model, 31, 53, Stress testing, Stressed PD, 226 Structural model, 83, 85, Subprime crisis, 6, 186 Supervisory Review Process, 323 Survival probability, 127 Systematic risk, 171, 241, 250, 256, 260 Template, 307 Term loan, 3, Theil entropy, 264 Through the cycle (TTC) rating, 124 Tier 1 capital, 9 Tier 2 capital, 11, 318 Tobit model, Top 20 borrower limits, Trading book, 344 Transition matrix analysis, xxi T-statistic, 199, 264 Two dimensional rating, 36 Two tier rating system, Type I error rate, 200 Type II error rate, 200 Unexpected loss (UL), 26, , 272, 303, 325

7 361 Unexpected loss contribution (ULC), 240 Unsecured loans, 159, 166, 339 Usage given default (UGD), Use test, Utilization of limits, 143 Validation principles, 231 Value at risk (VaR), 20, 277, 279, 329 Variable selection, 71 Vicious cycle, 8 Wilk s lambda, 53, 198 Wilcoxon rank-sum test, Whitney rank-sum tests, 169, 217 Working capital demand loan (WCDL), 146, 148 Working capital, 24, 26, 45, 54 Z score, 52 53