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This paper examines how credit derivatives have changed the construction of an efficient portfolio. Credit derivatives provide a way of gaining exposure to credit risk alone, to the exclusion of interest rate risk. They also permit a relatively easy use of leverage. We examine two types of allocation: the first is a conventional investment in government bonds, corporate bonds (investment grade and high yield) and equities in the United States; the second replaces corporate bonds with credit derivatives, which may also be leveraged. We look at past data on returns, risk and correlations of these investments, and we show that the credit risk component seems to have a strongly diversifying effect relative to the traditional asset classes, i.e. equities and government bonds. We then compute efficient frontiers within a standard mean-variance framework. The results show the advantages of credit derivatives for portfolio diversification, and the usefulness of leveraging this investment to extend the limits of the efficient frontier. ; info:eu-repo/semantics/published

Intro -- FEDERAL CREDIT: CONCEPTS, BUDGETARY TREATMENT, AND REFORM PROPOSALS -- FEDERAL CREDIT: CONCEPTS, BUDGETARY TREATMENT, AND REFORM PROPOSALS -- Library of Congress Cataloging-in-Publication Data -- CONTENTS -- PREFACE -- Chapter 1: BUDGETARY TREATMENT OF FEDERAL CREDIT (DIRECT LOANS AND LOAN GUARANTEES): CONCEPTS, HISTORY, AND ISSUES FOR THE 112TH CONGRESS -- SUMMARY -- INTRODUCTION -- JUSTIFICATIONS FOR CREDIT PROGRAMS -- Equity -- Efficiency -- FEDERAL CREDIT CONCEPTS -- Federal Credit -- Federal Credit Subsidies -- Concept of the Unified Budget -- FEDERAL CREDIT REFORM ACT OF 1990 -- Subsidy Costs -- Estimation of Subsidies -- Budgetary Treatment -- IMPLEMENTATION -- Federal Agencies -- Federal Accounting Standards Advisory Board -- Balanced Budget Act of 1997 -- Possible Payment of Subsidy Costs by Recipients -- Federal Credit in the President's FY2013 Budget -- PROPOSALS FOR THE EXPANSION OF REFORMS -- Inclusion of Government-Sponsored Enterprises -- Extension to Federal Insurance -- Inclusion of Market Risk -- Inclusion of Administrative Costs -- PROPOSED LEGISLATION IN THE 112TH CONGRESS -- S. 1651/H.R. 3414. Honest Budget Act -- H.R. 3581. Budget and Accounting Transparency Act of 2011 -- H.R. 3844. Honest Budget Act of 2012 -- APPENDIX A. CONCEPTS OF PRESENT VALUE AND FUTURE VALUE -- The Mathematics of Interest: -- APPENDIX B. FEDERAL CREDIT DATA -- APPENDIX C. BUDGETARY TREATMENT OF FEDERAL CREDIT BEFORE FY1992 -- Unified Budget -- Credit Budget -- APPENDIX D. BUDGETARY TREATMENT OF A HYPOTHETICAL DIRECT LOAN -- APPENDIX E. BUDGETARY TREATMENT OF A HYPOTHETICAL LOAN GUARANTEE -- APPENDIX F. DIRECT LOAN DATA, FY2013 -- APPENDIX G. LOAN GUARANTEE DATA, FY2013 -- End Notes -- Chapter 2: SUBSIDY COST OF FEDERAL CREDIT: COST TO THE GOVERNMENT OR FAIR VALUE COST? -- SUMMARY -- INTRODUCTION -- "Cost to the Government"

"This paper studies the limitations of monetary policy transmission within a credit channel frame- work. We show that, under certain circumstances, the credit channel transmission mechanism fails in that liquidity injections by the central bank into the banking sector are hoarded and not lent out. We use the term credit traps to describe such situations and show how they can arise due to the interplay between financing frictions, liquidity, and collateral values. Our analysis offers a characterization of the problems created by credit traps as well as potential solutions and policy implications. Among these, the analysis shows how quantitative easing and fiscal policy acting in conjunction with monetary policy may be useful in increasing bank lending. Further, the model shows how small contractions in monetary policy or in loan supply can lead to collapses in lending, aggregate investment, and collateral prices"--National Bureau of Economic Research web site

This report is based on the internship activities performed at Umbelino Monteiro SA, to finish my International Business Master. The internship allowed me to have contact with the business reality. I have developed tasks in a period of approximately six months in the financial and commercial areas. All the activities and procedures used will be explained is this report. One of the activities that consumes most of the time and in which I tried to support the company, is related with credit management. Credit management is not a new theme, but is still relevant to each firm as it allows to reduce their risk. At Umbelino this relevance is not an exception, due to the higher number of customers from different countries. With the crisis of 2007/2008, Umbelino, like many firms, began to experience great difficulties regarding the receipt of customer's credit. Several firms went bankrupt, leaving other companies in trouble and creating a snowball, which resulted in credit problems in most companies. For this reason, credit management theme is addressed in this paper. Moreover, the specific case of the company in question is analyzed, and some suggestions for improvement are presented. Umbelino uses monthly analyzes and credit insurance, in order to minimize the risk assumed. Although the firm lacks sufficient human resources to devote more to this issue and to use all the tools that the company already has available.

Abstract: There is an increasing focus on the giving of credit advice. Under the 2008 Consumer Credit Directive, there is an obligation to give consumers 'adequate explanations'. The 2011 proposal for a Directive on credit agreements relating to residential property not only gives notice of a corresponding obligation but also proposes laying down 'advice standards' for housing loans. Such credit advice can be necessary in an ever more complex financial market, characterized by over-indebtedness, and it can ensure that the recipient of the advice makes the decision that is most advantageous for them. Giving advice can thus protect clients from the consequences of making inappropriate choices, and it can benefit competition so as to help the achievement of an effective and properly functioning internal market. However, advice can have the opposite effect. If the advice is not independent, a client's trust in professional, qualified, and impartial advice can lead them into making inappropriate decisions. In particular in the area of obtaining credit, such decisions can have serious consequences of over-indebtedness. Résumé: Les conseils en crédit suscitent un intérêt croissant. En vertu de la Directive de 2008 sur le Crédit á la Consommation, il existe une obligation de donner aux consommateurs des 'explications adéquates'. La proposition de Directive de 2011 sur les contrats de crédit relatifs aux biens immobiliers á usage d'habitation n'énonce pas seulement des obligations correspondantes, mais propose aussi d'établir des 'conseils types' pour des prêts hypothécaires. Un tel conseil en crédit peut s'avérer nécessaire dans un marché financier de plus en plus complexe, caractérisé par un surendettement, et il peut permettre aux destinataires du conseil de prendre la décision la plus avantageuse pour eux. Fournir ce conseil peut donc protéger les clients des consequences qu'engendreraient des choix inappropriés et il peut être bénéfique pour la concurrence et le cas échéant favoriser l'accomplissement d'un marché intérieur effectif et fonctionnant correctement. Toutefois, le conseil peut avoir un effet inverse. Si le conseil n'est pas indépendant, la confiance du client dans un conseil professionnel, qualifié et impartial peut l'amener á prendre des décisions inappropriées. En particulier dans le domaine de l'obtention d'un crédit, de telles décisions peuvent avoir de sérieuses conséquences sur le surendettement.
Zusammenfassung : Die Kreditberatung steht verstärkt im Fokus. Gemäß der Verbraucherkreditrichtlinie von 2008 besteht eine Verpflichtung, Verbrauchern "angemessene Erläuterungen" zu geben. Der Vorschlag von 2011 für eine Richtlinie über Wohnimmobilienkreditverträge beinhaltet nicht nur eine entsprechende Verpflichtung, sondernschlägtdarüberhinausvor,"Beratungsstandards"fürWohnimmobilienkreditezu Grundezu legen. Eine solche Kreditberatungkannineinemimmerkomplizierteren, durch Überschuldung gekennzeichneten Finanzmarkt notwendig sein und stellt sicher, dass der Beratungsnehmer die für ihn beste Entscheidung trifft. Beratung kann somit Kunden vor den Folgen unpassender Entscheidungen bewahren und gleichzeitig die Marktwirtschaft unterstützen, indem dazu beigetragen wird, einen effektiven und ordentlich funktionierenden Binnenmarkt zu schaffen. Allerdings kann Beratung auch den gegenteiligen Effekt bewirken. Ist eine Beratung nänmlich nicht unabhängig, kann das Vertrauen des Kunden in eine professionelle, qualifizierte und unbeeinflusste Beratung dazu führen, dass er unangemessene Entscheidungen trifft. Insbesondere im Bereich der Kreditaufnahme können solche Entscheidungen schwerwiegende Konsequenzen wie Überschuldun

In diesem Buch stehen sowohl die Instrumente zur Beurteilung von Einzelrisiken als auch die Methoden zur aktiven Steuerung ganzer Kreditportfolios im Vordergrund. Weitere Schwerpunkte sind die aufsichtsrechtliche Behandlung von Krediten, das interne und externe Rating sowie die Analyse von Kreditprodukten.

Intelligent Credit Scoring presents a business-oriented process for the development and implementation of risk prediction scorecards. The credit scorecard is a powerful tool for measuring the risk of individual borrowers, gauging overall risk exposure and developing analytically driven, risk-adjusted strategies for existing customers. In the past 10 years, hundreds of banks worldwide have brought the process of developing credit scoring models in-house, while 'credit scores' have become a frequent topic of conversation in many countries where bureau scores are used broadly. In the United States, the 'FICO' and 'Vantage' scores continue to be discussed by borrowers hoping to get a better deal from the banks. While knowledge of the statistical processes around building credit scorecards is common, the business context and intelligence that allows you to build better, more robust, and ultimately more intelligent, scorecards is not. As the follow-up to Credit Risk Scorecards, this updated second edition includes new detailed examples, new real-world stories, new diagrams, deeper discussion on topics including WOE curves, the latest trends that expand scorecard functionality and new in-depth analyses in every chapter. Expanded coverage includes new chapters on defining infrastructure for in-house credit scoring, validation, governance, and Big Data.--

In this paper we investigate the impact of rapid credit growth on ex ante credit risk. We present micro-econometric evidence of the positive relationship between rapid credit growth and deterioration in lending portfolios: Loans granted during boom period