Abankisaplacethatwilllendyoumoneyifyoucanprove.ppt

Saunders Cornett, Financial Institutions Management, 4th ed. “A bank is a place that will lend you money if you can prove that you don’t need it.” Bob Hope Why New Approaches to Credit Risk Measurement and Management? Why Now? Structural Increase in Bankruptcy Increase in probability of default High yield default rates: 5.1% (2000), 4.3% (1999, 1.9% (1998). Source: Fitch 3/19/01 Historical Default Rates: 6.92% (3Q2001), 5.065% (2000), 4.147% (1999), 1998 (1.603%), 1997 (1.252%), 10.273% (1991), 10.14% (1990). Source: Altman Increase in Loss Given Default (LGD) First half of 2001 defaulted t