ABOUT BOOK

Imagine that you are a bank and a main part of your daily business is to lend money. Unfortunately, lending money is a risky business – there is no 100% guarantee that you will get all your money back. If the borrower defaults, you will face losses in your portfolio. Or, in a bit less extreme scenario, if the credit quality of your counterparty deteriorates according to some rating system, the loan will become more risky. These are typical situations in which credit risk manifests itself.