The e credit risk
Credit risk is the risk that the debtor will not pay its debt on the agreed due date. The credit can result simply from the delay of payment or be within the framework of a loan.
The level of credit risk
The level of credit risk depends on the estimate of default risk. Some people analyze it as the distance to the fault.
The extent of credit risks has increased with the development of capital markets and their globalization. This is the major risk for businesses and financial institutions.
Change in credit risk
The change in credit risk is reflected in the rating, ranging from surveillance to the change in the rating of the underlying asset in the case of a security and to the change in the rating. the signature of the issuer. The change in credit risk results in a change in the signature spread
The manifestation of credit risk
Credit risk manifests itself in the default of the counterparty.
Exposure to credit risk
Exposure to credit risk in commercial transactions results from the payment terms granted to the buyer, which is the basis of inter-company credit.
Exposure to credit risk also results from credits and loans.
Exposure to credit risk in the context of market finance results from the holding of financial instruments, short term (negotiable debt securities ) or medium and long term ( bonds ).
Exposure to credit risk also results from the sale of derivative products (swaps, options, forwards and other derivative instruments)
Credit risk assessment
Credit risk can be assessed globally at the level of the debtor, it can also be the subject of an independent assessment for a particular debt, if this is accompanied by guarantees in favor of the creditor. These guarantees can be sureties or sureties, personal or real.
Credit risk assessment involves the analysis of solvency risk and liquidity risk. Solvency relates to the ultimate possibility of payment and therefore of knowing about the debt will be paid, while liquidity relates to the date of payment.
Credit risk involves data concerning the debtor but also the external context (macroeconomic aspects relating to country risk, the economy in general, the sector of activity)
The risk assessment is important in the decision to grant or not the credit and whether it is a loan of money in the remuneration by an interest rate incorporating a risk premium which is a function of the risk assessment.
Credit risk protection
Protection against risk can be provided by various techniques: assignment of the receivable , credit insurance , financing methods to reduce or eliminate the risk ( factoring , forfeiture, leasing), Credit Default Swap [CDS] , risk management techniques credit ( assignment of receivables on the secondary receivables market , securitization and credit enhancement )