Credit Portfolio versus Loan Portfolio

From Open Risk Manual
Revision as of 13:10, 17 November 2019 by Wiki admin (talk | contribs) (Created page with "== Credit Portfolio versus Loan Portfolio == A loan portfolio is best understood as a ''subset'' of the broader credit portfolio class === Differences === * The primary disti...")
(diff) ← Older revision | Latest revision (diff) | Newer revision → (diff)

Credit Portfolio versus Loan Portfolio

A loan portfolio is best understood as a subset of the broader credit portfolio class

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 different markets and nature of the product involved means that there are also differences in 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
    • Accounting Regime
    • 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-- --