Corporate Financial Distress: Key Takeaways From 16 Chapters of Altman
Corporate Financial Distress, Restructuring, and Bankruptcy (4th ed.) by Edward I. Altman, Edith Hotchkiss, and Wei Wang (Wiley, ISBN 978-1-119-48180-5)
Credit risk
FRM Handbook Ch 24: Managing Credit Risk
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
Chapter 24 is the payoff chapter for the whole credit block. You spent chapters estimating default probabilities, exposures, and recoveries. Now Jorion stacks them into a portfolio loss distribution and asks the question every credit committee avoids: how much capital do you actually need?
FRM Handbook Ch 23: Credit Derivatives and Structured Products (Structured Products and CDOs)
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
The second half of Chapter 23 is where credit derivatives stop looking like insurance contracts and start looking like factory assembly lines. Banks slice pools of bonds into tranches, sell the safe-looking pieces to pension funds, and park the toxic waste in the equity slice. Jorion walks through how these structures work, and more importantly, what cannot change when you repackage cash flows.
FRM Handbook Ch 23: Credit Derivatives and Structured Products (Credit Default Swaps)
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
Credit derivatives sound exotic until you realize you already trade them wearing different names. A corporate bond is a risk-free bond plus a short CDS position. Chapter 23 explains why the market exploded, what a CDS actually is, and where the plumbing gets messy.
FRM Handbook Ch 22: Credit Exposure (Exposure and Risk Modifiers)
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
Knowing your exposure profile is step one. Step two is cutting it. Chapter 22 part two is a catalog of exposure modifiers the OTC and exchange worlds use every day. None of them eliminate credit risk. Together they can shrink it from scary to manageable.
FRM Handbook Ch 22: Credit Exposure (Credit Exposure by Instrument)
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
Before PD and LGD, you need to know how much is at stake when default happens. That is exposure at default (EAD). Chapter 22 is where credit risk meets derivatives math. A swap can start at zero value and still become your biggest counterparty headache three years later.
Basel III, Credit Risk Best Practices, and the EDC Case Study
Book: Enterprise Risk Management: From Incentives to Controls
Author: James Lam
ISBN: 978-1-118-41361-6
Basel Changed How the World Manages Credit
Regulation drives behavior, and nothing shaped credit markets like the Basel Committee’s capital rules. In 1988, Basel I required an 8% capital charge against risk-weighted assets. U.S. Treasuries got 0% weight. Corporate loans got 100%. Simple, global, and deeply flawed.
FRM Handbook Ch 21: Measuring Default Risk From Market Prices
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
Chapter 21 flips the lens. Instead of counting defaults from rating agency history, you read credit risk from prices. Markets are forward-looking, update fast, and aggregate scattered information. They also embed risk premia, liquidity premia, and tax effects. Jorion walks through both the power and the traps.
Credit Risk Basics: Expected Loss, Limits, and the Five-Step Process
Book: Enterprise Risk Management: From Incentives to Controls
Author: James Lam
ISBN: 978-1-118-41361-6
Credit Risk Is Everywhere, Not Just at Banks
James Lam opens Chapter 12 with a point that still catches people off guard: credit risk is not a bank-only problem. Yes, lenders worry about borrowers defaulting on loans. But any company that sells on credit, invests in bonds, trades derivatives, or depends on a business partner faces credit risk too.
FRM Handbook Ch 20: Measuring Actuarial Default Risk (Recovery Rates and Ratings)
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
Default probability tells you how often you lose. Recovery rate tells you how much you lose when it happens. Chapter 20 part two is all about LGD, and Jorion makes clear that recovery is not a constant you pull from a table and forget.
Credit Risk: Seniority, Defaults, Ratings, and Migration
Book: Fixed Income Trading and Risk Management
Author: Alexander Düring
ISBN: 9781119756354
Previous: Inflation-Indexed Bonds (Part 2) | Next: Covered Bonds
FRM Handbook Ch 20: Measuring Actuarial Default Risk (Credit Events and Default Rates)
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
Chapter 20 starts the actuarial side of credit risk. Instead of inferring default from market prices, you look at history, ratings, and explicit definitions of what “default” even means. That sounds boring until a CDS contract disagrees with a bondholder about whether restructuring counts.
FRM Handbook Ch 19: Introduction to Credit Risk
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
Chapter 19 opens the credit risk block of the handbook, and Jorion does not sugarcoat it. Credit risk is harder to measure than market risk. It matters more for most banks. And models that looked fine in quiet times fell apart in 2007-2008.
Starting the Skoglund & Chen Financial Risk Management Book Series
Financial Risk Management by Jimmy Skoglund and Wei Chen (ISBN 978-1-119-13551-7)
I picked up this book because most risk texts either go deep on one topic or stay abstract. Skoglund and Chen wrote something different: a full-stack practitioner guide that walks from bank foundations through market and credit models, liquidity and transfer pricing, and firmwide aggregation. They built it from years inside banks and risk tech vendors, not from a lecture hall.
Credit Risk: Modeling the Chance of Default
In Chapter 39 we valued default risk by modeling the firm’s assets, earnings, and cash. That is the “look inside the company” approach. Chapter 40 takes a completely different path. Instead of trying to understand why a company might default, just model default as a random external event. Roll a die. If you get a 1, the company defaults. Simple.
Merton Model: Your Company's Equity Is Just an Option
Welcome to Part Four of Wilmott’s book: Credit Risk. Up until now, every product we priced assumed that all cashflows are guaranteed. Coupons get paid. Bonds get redeemed. Nobody goes bankrupt. That was a comfortable world to live in, but it is not reality.
Emerging Market Bonds: Hard Currency Security Selection for Systematic Investors
Emerging market bonds sound exotic. But they are actually a massive, growing slice of the global fixed income universe. We’re talking about $29.6 trillion in total EM fixed income as of 2020. And yet most investors either ignore them completely or treat them as a single homogenous bucket of “risky stuff.”
Bank Management Strategies: Liquidity, Interest Rate, Credit, and Market Risk
Book: Financial Markets and Institutions, 11th Edition Author: Jeff Madura Publisher: Cengage Learning, 2015 ISBN: 978-1-133-94788-2
Chapter 19 is where the rubber meets the road. You know what banks are (Chapter 17) and how they are regulated (Chapter 18). Now the question is: how do bank managers actually run these things day to day? The answer involves juggling several types of risk at once while trying to maximize shareholder value.
Structure of Interest Rates: Why Yields Differ Between Securities
Book: Financial Markets and Institutions, 11th Edition Author: Jeff Madura Publisher: Cengage Learning, 2015 ISBN: 978-1-133-94788-2
Chapter 2 explained why the general level of interest rates changes. Chapter 3 answers a different question: why do different securities pay different yields at the same point in time? A Treasury bond and a corporate bond with the same maturity do not offer the same return. This chapter explains why.