Exposure at Default Model for Contingent Credit Line

In-spite of large volume of Contingent Credit Lines (CCL) in all commercial banks paucity of Exposure at Default (EAD) models, unsuitability of external data and inconsistent internal data with partial draw-down, has been a major challenge for risk managers as well as regulators for managing CCL portfolios. Current paper is an attempt to build an easy to implement, pragmatic and parsimonious yet accurate model to determine exposure distribution of a CCL portfolio. Each of the credit line in a portfolio is modeled as a portfolio of large number of option instrument which can be exercised by the borrower determining the level of usage. Using an algorithm similar to basic CreditRisk+ and Fourier Transforms we arrive at a portfolio level probability distribution of usage

SUSTAINABILITY OF THE PROBIOTIC LACTOBACILLUS CASEI IN FORTIFIED INDIAN MILK CAKES UNDER DIFFERENT PRESERVATION CONDITIONS-EFFECTS OF CO-IMMOBILIZATION OF L. CASEI AND COMMERCIAL PREBIOTIC INULIN (CHICORY BASED) AND MILLET INULIN

Objective: The objective of the present article is to identify the most suitable Indian millet inulin for the growth of probiotic Lactobacillus casei and to evaluate the effects of the fortification vectors (probiotics and probiotic-prebiotic combination in immobilized conditions) and immobilization methods on the sustainability of L. casei in a fortified Indian sweet (milk cake) preserved under different conditions.Methods: Inulin was extracted from pearl, finger and great millets. The concentrations of L. casei, grown on three millet inulins, were compared in 24 h batch culture. The L. casei and probiotic-prebiotic combinations namely L. casei-commercial inulin and L. casei-pearl millet inulin were immobilized using entrapment, external and internal microencapsulation methods. The Indian milk cake samples were fortified with the immobilized probiotic cells, co-immobilized probiotic-prebiotic combinations. The fortified samples were preserved at different conditions (temperature: 4 °C and-20 °C; Time: 1-4 w). The sustainability of L. casei in the preserved samples was determined using spread plate method and the cell concentrations were compared among all fortified samples.Results: Pearl millet inulin is determined to be the most suitable millet inulin for the growth of L. casei. The synergistic combination of L. casei–pearl millet inulin, co-immobilized with internal gelation technique is the best fortification vector for the viability of L. casei in preserved food samples.Conclusion: The L. casei, co-immobilized with pearl millet inulin through internal gelation technique, can be utilized as an effective fortification vector for the sustainability of probiotic cells in preserved Indian milk cakes and similar food samples

Parsimonious exposure-at-default modeling for unfunded loan commitments

Purpose–The purpose of this paper is to build an easy to implement, pragmatic and parsimonious yet accurate model to determine an exposure at default (EAD) distribution for CCL (contingent credit lines) portfolios. Design/methodology/approach–Using an algorithm similar to the basic CreditRisk+ and Fourier Transforms, the authors arrive at a portfolio level probability distribution of usage. Findings–The authors perform a simulation experiment which illustrates the convolution of two portfolio segments to derive an EAD distribution, chosen randomly from Moody's Default Risk Service (DRS) database of CCLs rated as of 12/31/2008, to derive an EAD distribution. The standard deviation of the usage distribution is found to decrease as we increase the number of puts used, but the mean value remains relatively stable, as the extreme points converge towards the mean to produce a shrinkage in the spread of the distribution. The authors also observe, for the sample portfolio, that an increase in the additional usage rate level also increases the volatility of the associated exposure distribution. Practical implications–This model, in conjunction with internal bank financial institution research, can be used for banks' EAD estimation as mandated by Basel II for bank CCL portfolios, or implemented as part of a Solvency II process for insurers exposed to credit sensitive unfunded commitments. Apart from regulatory requirements, distributions of stochastic exposure generated can be inputs for different economic capital models and stress testing procedures used to capture an accurate risk profile of the portfolio, as well as providing better insights into the problem of managing liquidity risk for a portfolio of CCLs and similar exposures. Originality/value–In-spite of the large volume of CCLs in portfolios of financial institutions all (for commercial banks holding these as well as for insurance companies having analogous exposures), paucity of EAD models, unsuitability of external data and inconsistent internal data with partial draw-downs have been a major challenge for risk managers as well as regulators in managing CCL portfolios.Basel II, Contingent credit, Credit risk, Exposure-at-default, Portfolio investment, Probability theory, Risk management, Solvency II