Difference between revisions of "Credit Portfolio versus Loan Portfolio"

Latest revision as of 11:18, 5 October 2021

Credit Portfolio versus Loan Portfolio

The two terms are used some time interchangeably but more accuracy is required when the types of Lending products involved in a portfolio varies. A loan portfolio is best understood as a subset of the broader credit portfolio class that only involves loans.

Differences

The primary distinction between a Credit Portfolio and a Loan Portfolio stems from the fact that a wide array of Financial Products, involve Credit Risk. Such products and/or contracts that may carry substantial credit risk are credit cards, derivatives, bonds, Securitisation etc.
The different markets and nature of the financial product involved means that there are also differences in how portfolios are managed, for example:
- Risk Assessment (e.g. based on market information or client information)
- Risk Management (tools available for risk mitigation)
- Possible trading strategies for the purchase or sale of credit exposure
- The Accounting Framework
- The applicable Regulatory Regime (including required Risk Capital)

Similarities

Despite the potentially significant differences, a unifying feature of all credit portfolios is that the core underlying risk is the credit risk of borrowers
The machinery for the quantitative analysis of credit portfolio risk is broadly similar

@@ Line 1: / Line 1: @@
 == Credit Portfolio versus Loan Portfolio ==
-A loan portfolio is best understood as a ''subset'' of the broader credit portfolio class
+The two terms are used some time interchangeably but more accuracy is required when the types of [[Lending products]] involved in a portfolio varies. A loan portfolio is best understood as a ''subset'' of the broader credit portfolio class that only involves loans.
 === Differences ===
-* The primary distinction between a [[Credit Portfolio]] and a [[Loan Portfolio]] stems from the fact that a wide array of [[Financial Products]], beyond the traditional [[Lending products]] category involve [[Credit Risk]]. Such products and/or contracts that may carry substantial credit risk are [[Derivatives]], bonds, [[Securitisation]] etc.
+* The primary distinction between a [[Credit Portfolio]] and a [[Loan Portfolio]] stems from the fact that a wide array of [[Financial Products]], involve [[Credit Risk]]. Such products and/or contracts that may carry substantial credit risk are [[Credit Card | credit cards]], [[Derivative | derivatives]], [[Bond | bonds]], [[Securitisation]] etc.
-* The different markets and nature of the product involved means that there are also differences in portfolios are managed, for example
+* The different markets and nature of the financial product involved means that there are also differences in how portfolios are managed, for example:
-** Risk assessment (e.g. based on market information or client information)
+** [[Risk Assessment]] (e.g. based on market information or client information)
-** Risk management (tools available for risk mitigation)
+** [[Risk Management]] (tools available for risk mitigation)
-** Possible trading strategies
+** Possible [[Trading Strategy | trading strategies]] for the purchase or sale of credit exposure
-** Accounting Regime
+** The [[Accounting Framework]]
-** Regulatory Regime (including required risk capital)
+** The applicable Regulatory Regime (including required [[Risk Capital]])
 === Similarities ===
 * Despite the potentially significant differences, a unifying feature of all credit portfolios is that the core underlying risk is the credit risk of borrowers
-* The machinery for quantitative analysis of credit portfolio risk is broadly similar-- --
+* The machinery for the quantitative analysis of credit portfolio risk is broadly similar
 [[Category:X versus Y]]
 [[Category:Credit Portfolio Management]]