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Credit Analyst (What they do (Use variety of tools (Programming (to…
Credit Analyst
What they do
Use variety of tools
Analytical
to develop value-at-risk models
for
financial instruments
classes of assets
How bad things can get?
With probability Alpha we will not lose more than V euros over T time
V is Value-at-Risk (VaR)
Alpha is a confidence level
T is a time horizon
can be computed
distribution of loss (l)
imperical
theoratical
distribution of gains (g)
to build risk-assessment models
Stress test
scenario models
Monte-Carlo simulations
Sensitivity analysis
Extreme value theory
Advanced Mathematical
to develop projections of the financial projections
of different assets classes in different economic environments
Programming
to valuate models
to price various derivative products
to evaluate various derivative products
Determine analytical tools
to assess and quantify risk
for specific product or transation
Determine applicability of these tools
to analyzing the risk of varied financial products,
assets and transactions.
Provide reports
Standartised
Custom
Participate at value-at-risk
determines aggregate risk over large range of assets
for reporting to senior management
Track academic research
In quantitative modeling
used for financial assets and its derivatives
Terminology
Financial products
Technical Standpoint
Securities
tradable financial asset
can be classified by
Currency of denomination
Ownership rights
degree of liquidity
income payments
...
ex. bonds
Derivatives
Option
Futurs
Balance sheet transactions
Risk Approach
Interest Rates products
Equities
Foreign Exchange
Credit Derivatives
Commodities
Structured Products
Balance Sheet
Is a statement of Net Worth
Assets = Liabilities + Equity
Business Net Worth = Assets - Liabilities
Assets
mortgage backed securities
mortgage backed derivatives
its derivatives