AIG Credit Risk Committee Meeting Minutes

Those From AIG Present Included: William N Dooley, Robert Lee Finch, Michel Lagoutte, R. Gender, Kevin McGinn, Win Neuger, and John Wibel Additionally, guests present during this meeting included: Eduardo Diaz-Perez, Andrew Forster, Gary Gorton, Aristotle Halikias, Paul Narayanan, Mark Vassilakis, Daniel Wing, and John Zung

AIG Credit Risk Committee Approval Form

Accompanying the completed Credit Risk Approval Form is an executive summary from the Credit Risk Committee to the Chief Credit Office, Kevin McGinn, describing the potential CDO transaction

Rating agencies and sovereign credit risk assessment

Credit rating agencies (CRAs) have not consistently met the expectations placed on them by investors and policymakers. It is difficult, however, to improve the quality of ratings through regulatory initiatives. In the short term, changes to the CRAsâ?? regulatory environment, in a context of high market uncertainty, may add to market stress. The role of credit ratings in regulation should be reduced but eliminating it entirely would have significant downsides, at least in the short term. The transfer of ratings responsibility to public authorities, including the European Central Bank, is unlikely to be a good alternative because of inherent conflicts of interest. The notion of risk-free sovereign bonds is challenged by the crisis, but the most straightforward way to address this challenge in the euro-area context would be the establishment of a euro-area-wide sovereign bond instrument. This Policy Contribution was prepared as a briefing paper for the European Parliament's Economic and Monetary Affairs Committeeâ??s Monetary Dialogue

Risikosteuerung mit Kreditderivaten unter besonderer Berücksichtigung von Credit Default Swaps

Within the last decade, credit risk management of financial institutions has been subject to major changes due to the development of the credit derivatives market. In the past, financial institutions merely had the possibility to manage their credit portfolio by either approving or refusing a credit request. Having made a decision, there was hardly any chance to influence the portfolio at a later stage. Alternative solutions for risk mitigation like selling the obligation (e.g. via an Asset Backed SecurityTransaction) or claiming further collateral were relatively complicated, cost-intensive and of doubtable success primarily due to their dependency on legal requirements and/or negotiation skills. With the emergence of credit derivatives, risk management has received a broad range of possibilities to transfer credit risk easily without affecting the credit relationship. In other words, credit derivatives enable the separation of credit risk from the original obligation and trading of the risk by itself. Therefore, credit portfolios can be managed actively at every stage. --Credit derivatives,credit derivatives market,credit default swap,credit risk transfer,pricing,valuation,default spread,implicit default probability,risk control,risk management,credit portfolio management,banking supervision,Basel II,credit risk mitigation

Credit ratings and credit risk

This paper investigates the information in corporate credit ratings. We examine the extent to which firms' credit ratings measure raw probability of default as opposed to systematic risk of default, a firm's tendency to default in bad times. We find that credit ratings are dominated as predictors of corporate failure by a simple model based on publicly available financial information (`failure score'), indicating that ratings are poor measures of raw default probability. However, ratings are strongly related to a straightforward measure of systematic default risk: the sensitivity of firm default probability to its common component (`failure beta'). Furthermore, this systematic risk measure is strongly related to credit default swap risk premia. Our findings can explain otherwise puzzling qualities of ratings.Credit Rating, Credit Risk, Default Probability, Forecast Accuracy, Systematic Default Risk

Towards a Theory of the Credit-Risk Balance Sheet

This article designs what it calls a Credit-Risk Balance Sheet (the risk being that of default by customers), a tool which, in principle, can contribute to revealing, controlling and managing the bad debt risk arising from a companys commercial credit, whose amount can represent a significant proportion of both its current and total assets. To construct it, we start from the duality observed in any credit transaction of this nature, whose basic identity can be summed up as Credit = Risk. Credit is granted by a company to its customer, and can be ranked by quality (we suggest the credit scoring system) and risk can either be assumed (interiorised) by the company itself or transferred to third parties (exteriorised). What provides the approach that leads to us being able to talk with confidence of a real Credit-Risk Balance Sheet with its methodological robustness is that the dual vision of the credit transaction is not, as we demonstrate, merely a classificatory duality (a double risk-credit classification of reality) but rather a true causal relationship, that is, a risk-credit causal duality. Once said Credit-Risk Balance Sheet (which bears a certain structural similarity with the classic net asset balance sheet) has been built, and its methodological coherence demonstrated, its properties static and dynamic are studied. Analysis of the temporal evolution of the Credit-Risk Balance Sheet and of its applications will be the object of subsequent works.credit-risk balance sheet, bad debts, risk, insolvency, commercial credit, credit, credit information, business risk, credit risk, credit management