Strategic capital allocation is an important topic in banking risk management, and this chapter effectively explains what economic capital is, the various methods for managing economic capital and the complex issues that must be addressed for strategic capital allocation to be beneficial. The chapter begins with an explanation of ... click here for more details.

Anyone looking to familiarize themselves with current options in portfolio credit risk management will benefit from reading this chapter. The chapter begins by arguing that there have been four main drivers to the development of portfolio credit risk tools (regulation, economic capital allocation, pricing and fund management), then provides ... click here for more details.

This chapter provides a detailed review of quantitative approaches to modeling default risk, starting with structural models (particularly Merton`s model) then focusing on four types of scoring approaches for smaller and private firms, namely Fisher linear discriminant analysis, logistic regression and probit, k-nearest neighbor classifier and support vector machine classifier. ... click here for more details.

This well-written chapter provides a thorough breakdown of various approaches to rating creditworthiness. The general rating process used by external agencies to assign issuers to broad risk buckets is explained, and some analysis of historical performance is provided, as well as the challenges associated with ratings and business cycles. ... click here for more details.

Loss given default (LGD), or recovery rate, measures the amount of money that can be recovered on defaulted loans or bonds and is therefore a critical element of any credit risk analysis. This chapter provides a complete breakdown of the issues of recovery such as the role of collateral, ... click here for more details.

Banking regulation aims to protect financial stability by avoiding system-wide distress, but its exact implementation can be challenging and ultimately can introduce new risks to the system. This well-written chapter provides an interesting overview of banking regulation, including a brief history of banking regulation, the principles which guide banking ... click here for more details.