Explain what you understand by the term credit risk

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Reference no: EM131178438

1. Produce a final report covering the following issues:

(i) Explain what you understand by the term credit risk. Discuss the alternative methodologies which have been proposed to measure credit risk. Your discussion should include the limitations of each approach.

(ii) Explain, in general terms, what are Credit Derivatives and then more specifically explain what Credit Default Swaps (CDS's) are. Discuss with suitable evidence whether you agree with the School of Thought that maintains that CDS's were responsible for the financial crisis of 2007/8.

(iii) Based on the lessons learnt during the recent financial crisis, what should:

a. Legislators do to ensure that CDS's are not responsible for financial instability.

b. Regulators do to ensure that appropriate risk management methodologies are in place.

c. Banks do to their risk management systems and to their management culture.

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In our assignment we have done 3000 words and we discussed about the credit risk and also about its alternative methodology. We also discussed credit derivatives and about the swaps. We also tried to explain the Regulators actions to ensure appropriate risk management methodologies are in place and the bank actions for risk management system and their management culture.

Reference no: EM131178438

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inf1178438

8/26/2016 5:27:14 AM

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len1178438

8/23/2016 2:39:29 AM

This is an assignment to be written by an individual student. The allowed word count is 3000. The essay will carry 50 percent of the overall course mark. In order to effectively complete this essay, you have to make extensive use of the relevant literature, both academic and from the practitioner perspective. It is also important to be able to provide an informative and fact based view on the issues discussed. Avoid unreliable resources such as Wikipedia and base your answers on policy and academic papers, as well as articles from well-respected press like Financial Times and The Economist. Be succinct, concise but, at the same time, provide well developed arguments.

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