Relevant papers
Major firms (primary firms) often utilize the services of smaller firms (secondary firms) and in some cases a large part of the revenue of the secondary firms comes from the primary firms. In credit card portfolios, credit is often extended to employees of a large firm. If the firm experiences financial difficulties, the credit risk of the credit held by the employees increases.
The analysis of the credit risk in these two cases is described in the attached paper.
Supervisory stress testing has become a regulatory requirement for most financial institutions since the global credit crisis. The costs of compliance are non-trivial. The attached paper explains that all firms, financial and non-financial, can benefit from employing scenario analysis to address a wide array of issues, beyond those arising from just financial regulation.
Extracting value-pdf fileThe question of how to measure the economic performance of a business within a financial institution generates a wide array of responses, with banks often using some form of RAROC measure because of its simplicity. Yet it is well known that RAROC is a flawed measure. The attached paper describes how to measure the return on a business, after adjusting for credit risk.
Performance measurement-pdf fileIn any form of commercial contract, counterparty risk is present. Estimating the credit value adjustment (CVA) and debt value adjustment (DVA) requires modeling the probabilities of default and the loss given default, recognizing the dependence structure among all the inputs. The attached paper discusses the use of collateral for risk mitigation.
Counterparty-Risk.pdf file