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Credit Risk Measurement Management of Loan Portfolio - Coggle Diagram
Credit Risk Measurement
Management of Loan Portfolio
Helps bank
Achieve Appropriate balance between risk and return
Manage loans on portfolio basis
Avoid concentration risk
Benefits
Scientific basis
Providing system of grading
Remove subjectivity
Monitoring loans
Altmans Z Score
Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5.
X1
Credit Portfolio View
Lending decisions are connected to the economy
Macroeconomic factor
Portfolio Management models
Altman Sharpe
Creditmetricstm
Risk adjusted roc
Securitization
Making money to securities
Loan pricing
Capital costs
Liquidity cost
Cost of funds