Credit Engineering for Bankers (eBook)

A Practical Guide for Bank Lending

Morton Glantz, Johnathan Mun (Autoren)

eBook Download: PDF | EPUB

2010 | 2. Auflage
556 Seiten
Elsevier Science (Verlag)
978-0-12-378586-2 (ISBN)

Infos

More efficient credit portfolio engineering can increase the decision-making power of bankers and boost the market value of their banks. By implementing robust risk management procedures, bankers can develop comprehensive views of obligors by integrating fundamental and market data into a portfolio framework that treats all instruments similarly. Banks that can implement strategies for uncovering credit risk investments with the highest return per unit of risk can confidently build their businesses.

Through chapters on fundamental analysis and credit administration, authors Morton Glantz and Johnathan Mun teach readers how to improve their credit skills and develop logical decision-making processes. As readers acquire new abilities to calculate risks and evaluate portfolios, they learn how credit risk strategies and policies can affect and be affected by credit ratings and global exposure tracking systems. The result is a book that facilitates the discipline of market-oriented portfolio management in the face of unending changes in the financial industry.

• Concentrates on the practical implementation of credit engineering strategies and tools
• Demonstrates how bankers can use portfolio analytics to increase their insights about different groups of obligors
• Investigates ways to improve a portfolio's return on risk while minimizing probability of insolvency

Professor Morton Glantz serves as a financial consultant, educator, and adviser to a broad spectrum of professionals, including corporate financial executives, government ministers, privatization managers, investment and commercial bankers, public accounting firms, members of merger and acquisition teams, strategic planning executives, management consultants, attorneys, and representatives of foreign governments and international banks. Professor Morton Glantz is a principal of Real Consulting and Real Options Valuation, firms specializing in risk consulting, training, certification, and advanced analytical software in the areas of risk quantification, analysis, and management solutions.
As a JP Morgan Chase (heritage bank) senior banker, Professor Glantz built a progressive career path specializing in credit analysis and credit risk management, risk grading systems, valuation models, and professional training. He was instrumental in the reorganization and development of the credit analysis module of the Bank's Management Training Program-Finance, which at the time was recognized as one of the foremost training programs in the banking industry.
Professor Glantz is on the (adjunct) finance faculty of the Fordham Graduate School of Business. He has appeared in the Harvard University International Directory of Business and Management Scholars and Research, and has earned Fordham University Deans Award for Faculty Excellence on three occasions. He is a Board Member of the International Standards Board, International Institute of Professional Education and Research (IIPER). The IIPER is a global institute with partners and offices around the world, including the United States, Switzerland, Hong Kong, Mexico, Portugal, Singapore, Nigeria, and Malaysia. Professor Glantz is widely published in financial journals and has authored 8 books.

Inhalt

Front Cover 1
Credit Engineering for Bankers 4
Copyright 5
Contents 8
Dedication 10
Foreword 12
Introduction 18
About The Authors 24
Part One -New Approaches to Fundamental Analysis 28
Chapter 1 Introduction to Loan Decision Making: The PRISM Model 30
Management 32
Intention (Purpose) 35
Repayment 36
Internal Repayment Sources: Short-Term Loans 36
External Repayment Sources: Short-Term Loans 38
Internal Repayment Sources: Long-Term Loans 39
External Repayment Sources: Long-Term Loans 40
Safeguards 40
Perspective 42
Chapter 2 International Financial Reporting Standards 44
The Tie Between Bankers and Auditors 46
A Review of Accounting Principles 53
Financial Reports 55
Chapter 3 Multivariate Ratio Analysis 64
The Role of Ratios 65
Ratio Trends 69
Liquidity Ratios 72
Activity or Turnover Ratios 73
Profitability Ratios 76
Leverage Ratios 80
Growth Ratios 82
Valuation Ratios 83
Statistical Analysis of Ratios: Decomposition Analysis 84
Chapter 4 Credit Analysis of Seasonal Businesses: An Integrated Approach 88
Types of Seasonal Businesses 88
Successful and Unsuccessful Seasonal Cycles 89
Techniques for Evaluating Seasonal Lending 91
Defensive Measures 97
Chapter 5 Asset-Based Lending 106
Market Segments 107
Basic Axioms of Asset-Based Lending 108
Security Interest 109
Loans Secured with Accounts Receivables 112
The Audit: Scope and Details 114
Loans Secured by Inventories 120
Loans Secured by Marketable Securities 123
Collateral Module in Risk Rating 124
Chapter 6 Cash Flow Analysis 126
Introduction to Analysis 128
Indirect Method of Cash Reporting: The Banker’s Cash Flow 129
Direct Method of Reporting Cash 129
Cash Flow Workshop 136
Other Important Reconciliations Bankers Consider 145
Cash Flow Analysis: Generic Points 150
Cash Flow Analysis: Constituent Points 151
Conclusion 155
Chapter 7 A Primer on Quantitative Risk Analysis 156
A Brief History of Risk: What Exactly Is Risk? 157
The Nature of Risk and Return 157
Uncertainty versus Risk 161
Risk Simulation Applications 163
Running a Monte Carlo Simulation 165
Using Forecast Charts and Confidence Intervals 177
Correlations and Precision Control 178
Chapter 8 Projections and Risk Assessment 212
Different Types of Forecasting Techniques 214
Running the Forecasting Tool in Risk Simulator 217
Time-Series Analysis 217
Multivariate Regression 221
Stochastic Forecasting 225
Nonlinear Extrapolation 229
Box-Jenkins Autoregressive Integrated Moving Average (ARIMA) Advanced Time-Series 231
Auto ARIMA (Box-Jenkins ARIMA Advanced Time-Series) 235
Basic Econometrics 236
J-Curve and S-Curve Forecasts 238
Generalized Autoregressive Conditional Heteroskedasticity (GARCH) Volatility Forecasts 239
Markov Chains 243
Limited Dependent Variables using Maximum Likelihood Models on Logit, Probit, and Tobit 243
Spline (Cubic Spline Interpolation and Extrapolation) 246
“Sensitivity” Financial Forecasting 248
Exercise: Forecasting 255
Chapter 9 Sustainable Growth and Credit Risk Management 264
The Sustainable Growth Model 266
Solving Sustainable Growth Problems 272
Curve Fitting 277
Chapter 10 Specialized Lending Risk Rating 280
Project Finance 282
Object Finance 287
Commodities Finance 288
Income-Producing Real Estate, High-Volatility Commercial Real Estate Exposures, and Real Estate Projects Under Construction 290
Riga Deal Analysis: Financing a Residential Complex and Shopping Mall 294
Chapter 11 Recognition, Diagnosis, and Response to Troubled Loans 296
Financial Distress Models 298
Other Models 302
Loan Classification 303
The Classified Loan Write-Up 305
Workout 306
A Lender’s Liability Help Line 309
Loan Restructuring: A Workout Decision 311
Corporate Valuation Model: A View of Liquidation versus Restructuring Decisions 312
Bankruptcy 314
Debtor-in-Possession Financing 317
Chapter 12 Strategic Real Options Analysis: Managing Risk Through Flexibility 322
What Are Real Options? 323
The Real Options Solution in a Nutshell 324
Issues to Consider 325
Implementing Real Options Analysis 326
Types of Real Options Strategies 327
Execution Option Types 328
Industry Leaders Embracing Real Options 328
Real Options Example in Banking: Asset Liability Management 331
Part Two -Credit Administration 336
Chapter 13 Capital Adequacy 338
Functions of Bank Capital 338
A Historical Perspective 341
The Basel Accords 342
Accounting, Economic, and Regulatory Defined Value 343
Regulatory Denominated Capital (Regulatory Accounting) 346
Regulatory Capital Features13 352
Capital Ratios 357
Capital Adequacy: Establishing a Technical Framework 358
Chapter 14 Quantitative Credit and Market Risk Analysis 360
Probability of Default 362
Empirical Models of Probability of Default 367
Economic Capital and Value at Risk 371
Efficient Portfolio Allocation and Economic Capital VaR 379
Chapter 15 Portfolio Optimization and Management of Default Risk 404
Optimization Procedures 405
Continuous Optimization 407
Efficient Frontier and Advanced Optimization Settings 414
Stochastic Optimization 415
Illustrative Example: Portfolio Optimization and the Effects on Portfolio Value at Risk 422
Exercise: Optimization 423
Chapter 16 Options Valuation 436
Options Valuation: Behind the Scenes 436
Binomial Lattices 440
The Look and Feel of Uncertainty 442
Chapter 17 Exotic Options, Options Engineering, and Credit Risk 458
Common Credit Derivatives 459
OTC Exotic Options 460
Chapter 18 Credit and Debt Valuation 480
Illustrations in Credit Analysis 480
Illustrations in Debt Analysis 486
Chapter 19 Building Integrated Exposure Systems 496
GES Structure 497
GES and Loan Concentrations 502
GES and Assessment of Capital Adequacy 503
Liquidity Concerns 504
Customer Relationships and Marketing 504
GES and Disclosure to Outsiders 505
GES and Reports to the Board of Directors 507
Cross-Border Exposure Reporting 508
Exposure Information Systems: Design 508
Final Thoughts 514
Chapter 20 Building Risk-Adjusted Pricing Models 516
Loan Pricing Models 519
Stochastic Net Borrowed Funds Pricing Model 521
Output Screen and Yield Calculation 527
Moving From Deterministic Pricing to a Stochastic Pricing Solution 529
Loan Pricing Lessons 532
Index 534

Produkt-Details

• Erscheint lt. Verlag: 25.11.2010
• Sprache: englisch
• Themenwelt: Sachbuch/Ratgeber ► Beruf / Finanzen / Recht / Wirtschaft ► Geld / Bank / Börse
• Themenwelt: Recht / Steuern ► Wirtschaftsrecht
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• Themenwelt: Betriebswirtschaft / Management ► Spezielle Betriebswirtschaftslehre ► Bankbetriebslehre
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Unternehmensführung / Management
• ISBN-10: 0-12-378586-3 / 0123785863
• ISBN-13: 978-0-12-378586-2 / 9780123785862