Risk-adjusted Lending Conditions: An Option Pricing Approach

188 Pages·2003·1.14 MB·English

by  Werner Rosenberger

Risk-adjusted Lending Conditions
An Option Pricing Approach
Werner Rosenberger

Risk-adjusted Lending Conditions
WileyFinanceSeries
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Interest-Rate Option Models: Understanding, Analysing and Using Models for Exotic Interest-Rate
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Risk-adjusted Lending Conditions
An Option Pricing Approach
Werner Rosenberger
Published2003by JohnWiley&SonsLtd,TheAtrium,SouthernGate,Chichester,
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Copyright(cid:1)C 2003WernerRobertRosenberger
FirsteditionpublishedinGermanbyPaulHauptVerlag,Berne,Switzerlandinpaperbackin2000
TranslatedbyChristopherMassy-Beresford,4VaughanAvenue,LondonW60XS
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Rosenberger,Werner.
[Risikoada¨quateKreditkonditionen.English]
Risk-adjustedlendingconditions:anoptionpricingapproach/WernerRosenberger;
[translatedbyChristopherMassy-Beresford].
p. cm.—(Wileyfinanceseries)
Includesbibliographicalreferencesandindex.
ISBN0-470-84752-2(alk.paper)
1.Option(Finance)—Prices—Mathematicalmodels.
2.Credit—Management—Mathematicalmodels. 3.Riskmanagement—Mathematical
models. I.Title. II.Series.
HG6024.A3R67 2002
332.1(cid:2)753(cid:2)0681—dc21 2002031125
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AcataloguerecordforthisbookisavailablefromtheBritishLibrary
ISBN0-470-84752-2
Typesetin10/12ptTimesbyTechBooks,NewDelhi,India
PrintedandboundinGreatBritainbyBiddlesLtd,GuildfordandKing’sLynn
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For my family

Contents
Preface1 xiii
Preface2 xv
PartI Outline 1
1 Introduction 3
1.1 Theproblem 3
1.2 Narrowingthesubjectdown,settingtheobjectiveandsubdividingit 3
1.3 Theinsuranceconcept 5
1.4 Typesofprobleminthecontextofloanbusiness 7
1.5 Loaninterestratemodel 8
1.6 Modelforcalculatingrisksurcharge 9
1.7 Assumptions 11
1.8 Testingthemodel 12
1.9 Loanexposuremodels 13
1.9.1 Classicalmethods 14
1.9.2 Moderncreditriskanalysisbasedonfinancialtheory 14
1.9.3 Themodelpresentedhereseeninrelationtopreviousmodels 16
2 Ratingsystem 19
2.1 Theneedforaratingsystem 19
2.2 Definingshortfallriskintermsoffigures 20
2.3 Definingthecredit-worthinesskeyfigure 21
2.4 Exampleofaratingsystemintermsoffigures 21
2.5 Amplificationoftheratingsystemforverycompetitivemarkets 23