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Elements of the Credit Decision

  • Erik Banks
Part of the Finance and Capital Markets Series book series (FCMS)

Abstract

As we have seen above, exposure to a given counterparty will not be incurred if an institution elects not to transact business. If, however, a decision to transact is taken, management of the exposure becomes a necessity. In order for a bank to arrive at the decision of whether or not to transact, it must consider a series of factors: counterparty credit quality, risk, return, maturity, motivation and enhancement. In considering these elements, the bank will arrive at a decision; we term this the credit decision. If affirmative, the decision will commit a bank to a given transaction in a certain structure; if negative, it will avoid commitment to the transaction.

Keywords

Credit Spread Credit Quality Hurdle Rate Counterparty Risk West Texas Intermediate 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Erik Banks 1993

Authors and Affiliations

  • Erik Banks
    • 1
  1. 1.TokyoJapan

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