Modern Credit Risk Management ─ Theory and Practice

Modern Credit Risk Management: From Theory to Practice is a practical guide to the latest rism management tools and techniques applied in the market to assess and manage credit risks at bank, sovereign, corporate and structured finance level. It strongly advocates the importance of sound credit risk management and how this can be achieved with prudent origination, credit risk policies, approval process, setting of meaningful limits and underwriting criteria.

The book discusses the various quantitative techniques used to assess and manage credit risk, including methods to estimate default probabilities, credit value at risk approaches and credit exposure analysis. Basel I, II and III are covered, as are the true meaning of credit ratings; how these are assigned; their limitations, the drivers of downgrades and upgrades, and how credit ratings should be used in practise is explained.

Modern Credit Risk Management not only discusses credit risk from a quantitative angle but further explains how important the qualitative and legal assessment is. Credit risk transfer and mitigation techniques and tools are explained; netting, ISDA master agreement, schedule and CSA, centralised counterparty clearing and margin collateral are all covered, as are overcollateralization, covenants and events of default. Credit derivatives are also explained, Total Return Swaps (TRS), Credit Linked Notes (CLN) and Credit Default Swaps (CDS). Furthermore, the author discusses what we have learned from the financial crisis of 2007 and sovereign crisis of 2010 and how credit risk management has evolved. Finally the book looks at the new regulatory environment, looking beyond Basel to the European Union (EU) Capital Requirements Regulation and Directive (CRR-CRD) IV, the Dodd–Frank Wall Street Reform and Consumer Protection Act.

This book presents a fully up to date resource for credit risk practitioners everywhere, outlining the latest best practices, and providing both quantitative and qualitative insights. It will be a welcome addition to any risk library, and a must have reference for credit risk practitioner. 

Dr. Panayiota Koulafetis has held a number of positions in the Investment Banking, Asset Management, Rating Agency and Energy Trading Sectors. At Moody’s Investors Service Ltd she lead the rating analysis and provided surveillance on a wide range of Structured Finance transactions across different jurisdictions: Commercial Mortgage Backed Securities (CMBS), Asset Backed Securities (ABS), Residential Mortgage Backed Securities (RMBS), Whole Business transactions / Corporate Securitisation, Small Medium Enterprises (SMEs) and Lease transactions.

At the Securitization department of Nomura International plc she dealt with various transactions across different asset classes. She was also a Senior Structurer at Duke Energy, structuring mainly Energy Derivatives and dealing with complex option structures. She has also held Quantitative Research and Risk Management roles at Westdeutsche Landesbank (WestLB) Asset Management Ltd and Southern Company.

She is a regular speaker in academic and industry conferences and has published in academic journals as well as in practitioners’ periodicals. She lectures at the School of Economics and Finance at Queen Mary University of London and acts as a Consultant in various Investment Banking projects.

Panayiota holds a Ph.D. in Finance from Cass Business School. She also holds an MSc in Business Finance from Brunel University and a BSc (Hon) in Business Administration from University of Piraeus in Greece.

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