1Chapter 1 Trade Credit Financing and Credit Risk Exposure
1267.8 Credit Risk
21.1 Introduction
1277.9 Summary
31.2 What is trade credit in business?
1287.10 Exercise : References
41.3 What is trade credit used for?
129Chapter 8 Trade Credit Financing Instruments under the Standardized Methodology
51.4 Trade credit advantages and disadvantages
1308.1 Introduction
61.4.1 What are the main advantages of trade credit?
1318.2 Capturing Trade Finance in the Current ESS
71.4.2 What are the main disadvantages of trade credit?
1328.3 Value Added of Compiling a Single Satellite Table
81.5 What is credit insurance?
1338.4 Trade Finance: A Satellite Table
91.6 Understanding Trade Credit
1348.5 Trade Credit Financing Instruments under the IRB Methodology
101.7 Trade Credit Accounting
1358.6 Exposures Based on Purchased Trade Credits
111.8 Trade Credit Trends
1368.6.1 How Lenders Control Credit Exposure
121.9 Advantages and Disadvantages of Trade Credit
1378.6.2 Credit Default Swaps
131.10 Types of Trade Credit
1388.6.3 Credit Exposure vs. Credit Risk
141.11 The direct costs of trade credit
1398.7 Exposures Collateralized by Trade Credits
151.12 Buyers - Best practices for extending trade credit
1408.8 Capital Regulation on Large Exposures
161.13 Sellers
1418.9 Summary
171.14 What is Credit Risk Exposure?
1428.10 Exercise : References
181.14.1 Credit risk exposure
143Chapter 9 Risk Mitigation of Trade Credit and Distress along the Supply Chain
191.14.2 Types of credit risk
1449.1 Introduction
201.14.3 How is credit risk exposure calculated?
1459.2 Summary
211.14.4 What is the use of credit risk exposure?
1469.3 Exercise : References
221.15 Principles for the Assessment of Banks’ Management of Credit Risk
147Chapter 10 Market Risk Control
231.16. Establishing an Appropriate Credit Risk Environment
14810.1 Various Methodologies
241.17 Operating under a Sound Credit Granting Process
14910.2 Need for risk
251.18 Maintaining an Appropriate Credit Administration, Measurement and Monitoring Process
15010.3 Allocation of risk
261.19 Ensuring Adequate Controls over Credit Risk
15110.4 Monitoring of market risk
271.20. The Role of Supervisors
15210.5 Controlling risk
281.21 Summary
15310.5.1 Take steps to repair breach
291.22 Exercise : References
15410.5.2 Exception to limit
302.1 Introduction
15510.5.3 Changing the limits
31Chapter 2. An Internal Rating System for Trade Credit Financing Instruments
15610.5.4 Posting reserve
322.2 IRB treatment
15710.5.5 Do nothing
332.2.1 Range of Practice
15810.6 Responsibilities of the market risk control department
342.2.2 Probability of Default (PD)
15910.6.1 Requirements
352.3 An Internal Rating System for Exposures Based on Purchased/Assigned Trade Receivables
16010.6.2 Relationship with front office
362.4 An Internal Rating System for Exposures Backed by Trade Receivables
16110.7 Regulatory Requirements
372.4.1 Risk-weighted assets for default risk
16210.7.1 Basel II
382.4.2 Risk-weighted assets for dilution risk
16310.7.2 Capital Adequacy Ratio (CAR)
392.4.3 Treatment of purchase price discounts for receivables
16410.8 Summary
402.5 Summary
16510.9 Exercise
412.6 Exercise
166References
42References
167Chapter 11 Counterparty Risk Control
43Chapter 3 Credit Risk Parameters: Theoretical Features and Empirical Evidence
16811.1 Reasons for non- fulfilment of obligation: 11.1.1 Delayed settlement
443.1 Introduction
16911.2 Consequences of counterparty default
453.2 Measurement of the Credit Risk
17011.3 How to measure the risk
463.3 Default Risk
17111.3.1 Expected loss
473.3.1 What Is Default Risk?
17211.3.2 Credit exposure
483.3.2 Understanding Default Risk
17311.3.3 Potential Future Exposure (PFE)
493.3.3 Determining Default Risk
17411.3.4 Netting
503.3.4 Types of Default Risk
17511.3.4 Back-to-back
513.4 Probability Default
17611.4 Imposing limits
523.4.1 Understanding Default Probability
17711.5 Who is the counterparty?
533.4.2 High-Yield vs. Low-Yield Debt
17811.6 Collateral
543.5 Loss Given Default
17911.6.1 Example of a collateral agreement
553.5.1 Understanding Loss Given Default (LGD)
18011.6.2 Advantages of collateral
563.5.2 How to Calculate LGD
18111.7 Activities of the counterparty risk control department
573.5.3 Loss Given Default (LGD) vs. Exposure at Default (EAD)
18211.7.1 Assign limits based on credit worthiness
583.5.4 Example of Loss Given Default (LGD)
18311.7.2 Measure exposure
593.6 Exposure at Default
18411.7.3 Deal with breaches
603.6.1 Understanding Exposure at Default
18511.7.4 Policies for new trade types
613.6.2 Special Considerations
18611.7.5 Maintain legal data
623.6.3 Exposure at Risk Example
18711.7.6 Manage margin payments and receipts
633.6.4 What Is Exposure at Default?
18811.7.7 Interface with management
643.7 Maturity
18911.8 What are the risk involved in analysing credit risk?
653.7.1 Understanding Maturity
19011.8.1 Added complication of credit risk
663.7.2 Maturity of a Deposit
19111.8.2 Insufficient consideration of counterparty risk
673.7.3 Maturity of Bonds
19211.8.3 Sudden counterparty changes
683.7.4 Maturity of Derivatives
19311.9 Online payment
693.7.5 Maturity of Foreign Exchange
19411.9.1 Benefits of payment systems
703.7.6 Special Considerations
19511.9.2 Risks associated with payment systems
713.8 Dilution Risk
19611.10 Summary
723.8.1 How Do Shares Become Diluted?
19711.12 Exercise
733.8.2 The Effects of Dilution
198References
743.8.3 Warning Signs of Dilution
19912.1 Pre execution
753.8.4 Diluted Earnings Per Share (EPS)
20010.1.1 Provisional trades
763.8.5 Treasury Stock Method and Diluted EPS
20110.1.2 Orders
773.8.6 Financial Statements and Diluted EPS
20212.2 Execution and booking
783.8.7 The Bottom Line
20312.2.1 Execution
793.9 Summary
20412.2.2 Booking
803.10 Exercise
20510.2.3 Straight Through Processing
81References
20612.3 Confirmation
82Chapter 4. Concentration Risk: Alternative Approaches and Empirical Evidence
20712.3.1 Matching
834.1 Introduction
20812.3.2 Confirmation
844.2 The assumptions in the IRB model
20912.4 Post Booking
854.3 The concentration risk project of the RTF
21012.4.1 Trade scrutiny
864.4 How important is the effect of name concentration on economic capital?
21112.4.2 Enrichment
874.5 Methodologies of dealing with name concentration
21212.4.3 Cashflows
884.6 Summary
21312.4.4 Fees and duties
894.7 Exercise : References
21412.4.5 Error reporting
90Chapter 5 Application of Credit Risk Measures to Internal Processes
21512.5 Settlement
915.1 Introduction
21612.5.1 The importance of settlement
925.2 Credit Risk Origination
21712.5.2 Settlement instructions
935.3 Credit Risk Control
21812.5.3 Custodian
945.3.1 Managing Credit Risk
21912.5.4 Cash or physical
955.3.2 Sensitivity analysis
22012.5.5 Cash settlement of commodities
965.3.3 Portfolio-level controls
22112.5.6 Nostro accounts
975.3.4 The 5 Cs of Credit
22212.5.7 Risks
985.3.5 Credit Risk Management Explained
22312.6 What happens overnight
995.5 Summary
22412.6.1 Individual trade and aggregation with other trades
1005.6 Exercise
22512.6.2 Date and time
101References
22612.6.3 Overnight processes
102Chapter 6 Trade Credit Instruments in Capital Adequacy Regulation
22712.6.4 Amalgamation between systems
1036.1 Introduction
22812.7 Changes during lifetime
1046.2 Basel capital framework
22912.7.1 Dividends
1056.2.1 Banking risk and capital requirements
23012.7.2 Coupons
1066.2.2 Basel II’s response to Base I’s perceived weaknesses
23112.7.3 Other corporate actions
1076.3 Liquidity management: 6.3.1 Leverage ratio
23212.7.4 Changes as a result of market data
1086.4 Trade finance in the Basel capital framework
23312.7.5 Products using fixings
1096.4.1 Trade finance and credit risk
23412.7.6 Changes to the trade
1106.4.2 Leverage ratio and trade finance
23512.7.7 Exercise and maturity
1116.4.3 Industry representations and the risks of trade finance
23612.7.8 Risks
1126.4.4 The 2011 changes announced by the BCBS
23712.8 Reporting during lifetime
1136.5 Summary
23812.9 Exercise
1146.6 Exercise
23912.10 Maturity
115References
24012.11 Trade example : 12.12 Summary
116Chapter 7 Credit Risk Capital Requirements: A Holistic View
24112.13 Exercise : References
1177.1 Introduction
242Chapter 13 Overview of Credit Risk and Credit Derivatives
1187.2 Macroeconomic scenarios
24313.2 Credit derivatives
1197.2.1 Satellite macroeconomic model
24413.3 Estimating default probability
1207.2.2 Portfolio model Systemic Credit Risk
24513.4 Portfolio credit derivatives
1217.3 A simulation algorithm
24613.5 Summary
1227.4 A test run
24713.6 Exercise
1237.5 The Capital Swamp
248References
1247.6 When Capital is Not a Cure-All
249Glossary
1257.7 The Leverage Ratio
250Index
