1、商业银行管理 ROSE 7e 课后答案chapter09CHAPTER 9RISK MANAGEMENT USING ASSET-BACKED SECURITIES, LOAN SALES, CREDIT STANDBYS, AND CREDIT DERIVATIVESGoal of This Chapter: The purpose of this chapter is to learn about some of the newer financial instruments that financial institutions have used in recent years to
2、help reduce the risk exposure of their institutions and, in some cases, to aid in generating new sources of fee income and in raising new funds to make loans and investments.Key Topics in This ChapterThe Securitization ProcessSecuritizations Impact and RisksSales of Loans: Nature and RisksStandby Cr
3、edits: Pricing and RisksCredit Derivatives and CDOsBenefits and Risks of Credit DerivativesChapter OutlineI. IntroductionII. Securitizing Bank Loans and Other AssetsA. Nature of SecuritizationB. The Securitization ProcessC. Advantages of SecuritizationD. The Beginnings of Securitization The Home Mor
4、tgage Market1. Collateralized Mortgage Obligations CMOs2. Loan Backed BondsE. Examples of Other Assets That Have Been SecuritizedF. The Impact of Securitization Upon Lending InstitutionsG. Regulators Concerns About SecuritizationIll. Sales of Loans to Raise FundsA. Nature of Loan SalesB. Loan Partic
5、ipations and Loan StripsC. Reasons Behind Loan SalesD. The Risks in Loan SalesIV. Standby Credit LettersA. The Nature of Standby Credits (Contingent Obligations)B. Types of Standby Credit LettersC. Advantages of StandbysD. Reasons for Rapid Growth of StandbysE. The Structure of Standby Letters of Cr
6、editF. The Value and Pricing of Standby LettersG. Sources of Risk with Standby CreditsH. Regulatory Concerns about Standby Credit ArrangementsI. Research Studies on Standbys, Loan Sales, and SecuritizationsV. Credit Derivatives: Contracts for Reducing Credit Risk Exposure on the Balance Sheet A. An
7、Alternative to Securitization B. Credit Swaps C. Credit Options D. Credit Default Swaps E. Credit Linked Notes F. Collateralized Debt ObligationsG. Risks Associated With Credit DerivativesVI. Summary of the ChapterConcept Checks9-1. What does securitization of assets mean?Securitization involves the
8、 pooling of groups of earning assets, removing those pooled assets from the banks balance sheet, and issuing securities against the pool. As the pooled assets generate interest income and repayments of principal the cash generated by the pooled earning assets flows through to investors who purchased
9、 those securities.9-2. What kinds of assets are most amenable to the securitization process?The best types of assets to pool are high quality, fairly uniform loans, such as home mortgages or credit card receivables.9-3. What advantages does securitization offer lending institutions?Securitization gi
10、ves lending institutions the opportunity to use their assets as sources of funds and, in particular, to remove lower-yielding assets from the balance sheet to be replaced with higher-yielding assets.9-4. What risks of securitization should the managers of lending institutions be aware of?Lending ins
11、titutions often have to use the highest-quality assets in the securitization process which means the remainder of the portfolio may become more risky, on average, increasing the banks capital requirements.9-5. Suppose that a bank securitizes a package of its loans that bear a gross annual interest y
12、ield of 13 percent. The securities issued against the loan package promise interested investors an annualized yield of 8.25 percent. The expected default rate on the packaged loans is 3.5 percent. The bank agrees to pay an annual fee of 0.35 percent to a security dealer to cover the cost of underwri
13、ting and advisory services and a fee of 0.25 percent to Arunson Mortgage Servicing Corporation to process the expected payments generated by the packaged loans. If the above items represent all the costs associated with this securitization transaction can you calculate the percentage amount of resid
14、ual income the bank expects to earn from this particular transaction?The banks estimated residual income should be about:Gross LoanSecurity Expected Default OnUnderwritingYield-Interest Rate-Packaged Loans-And Advisory Fee13%8.25%3.5%.35%ServicingExpected-Fee=Residual Income.25%.65%9-6. What advanta
15、ges do sales of loans have for lending institutions trying to raise funds?Loan sales permit a lending institution to get rid of less desirable or lower-yielding loans and allow them to raise additional funds. In addition, replacing loans that are sold with marketable securities can increase the liqu
16、idity of the lending institution.9-7. Are there any disadvantages to using loan sales as a significant source of funding for banks and other financial institutions?The lender may find themselves selling off their highest quality loans, leaving their loan portfolio stocked with poor-quality loans whi
17、ch can trigger the attention of regulators who might require higher capital requirements for the lender. .9-8. What is loan servicing?Loan servicing involves monitoring borrower compliance with a loans terms, collecting and recording loan payments, and reporting to the current holder of the loan.9-9
18、. How can loan servicing be used to increase income?Many banks have retained servicing rights on the loans they have sold, earning fees from the current owners of those loans.9-10. What are standby credit letters? Why have they grown so rapidly in recent years?Standby credit letters are promises of
19、a lender to pay off an obligation of one of its customers in case that customer cannot pay. It can also be a guarantee that a project of customer is completed on time. There are several reasons that standby credit agreements have grown. There has been a tremendous growth in direct financing by compa
20、nies (issuance of commercial paper) and with growing concerns about default risk on these direct obligations banks have been asked to provide a credit guarantee. Another reason for their growth is the ability of the bank to use their skills to add fee income to the bank Another reason is that these
21、have a relatively low cost for the bank. Finally banks and customers perceive that there has been an increase in economic fluctuations and there has been increased demand for risk reducing devices.9-11. Who are the principal parties to a standby credit agreement?The principal parties to a standby cr
22、edit agreement are the issuing bank or other institution, the account party who requested the letter, and the beneficiary who will receive payment from the issuing institution if the account party cannot meet its obligation.9-12. What risks accompany a standby credit letter for (a) the issuer and (b
23、) the beneficiary?Standbys present the issuer with the danger that the customer whose credit the issuer has backstopped with the letter will need a loan. That is, the issuers contingent obligation will become an actual liability, due and payable. This may cause a liquidity squeeze for the issuer. Th
24、e beneficiary that has to collect on the letter must be sure it meets all the conditions required for presentation of the letter or it will not be able to recover its funds.9-13 How can a lending institutions mitigate the risks inherent in issuing standby credit letters?They can use various devices
25、to reduce risk exposure from the standby credit letters they have issued, such as:1. Frequently renegotiating the terms of any loans extended to customers who have standby credit guarantees so that loan terms are continually adjusted to the customers changing circumstances and there is less need for
26、 the beneficiaries of those guarantees to press for collection.2. Diversifying standby letters issued by region and by industry to avoid concentration of risk exposure.3. Selling participations in standbys in order to share risk with a variety of lending institutions.9-14. Why were credit derivative
27、s developed? What advantages do they have over loan sales and securitizations, if any?Credit derivatives were developed because not all loans can be pooled. In order to be pooled, the group of loans has to have common features such as maturities and cash flow patterns and many business loans do not
28、have those common features. Credit derivatives can offer the beneficiary protection in the case of loan default and may help the bank reduce its credit risk and possibly its interest rate risk as well.9-15. What is a credit swap? For what kinds of situations was it developed?A credit swap is where t
29、wo lenders agree to swap portions of their customers loan repayments. It was developed so that banks do not have to rely on one narrow market area. They can spread out the risk in the portfolio over a larger market area.9-16. What is a total return swap? What advantages does it offer the swap benefi
30、ciary institution?A total return swap is a type of credit swap where the dealer guarantees the swap parties a specific rate of return on their credit assets. A total return swap can allow a bank to earn a more stable rate of return than it could earn on its loans. This type of arrangement can also s
31、hift the credit risk and the interest rate risk from one bank to another. 9-17. How do credit options work? What circumstances result in the option contract paying off?A credit option helps guard against losses in the value of a credit asset or helps offset higher borrowing costs. A bank which purch
32、ases a credit option contract will exercise their option if the asset declines significantly in value or loses its value completely. If the assets are paid off as expected then the option will not be exercised and the bank will lose the premium they paid for the option. A bank can also purchase a credit option which will be exercised if their borrowing costs rise above a specified spread between th
