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Credit risk is one of the largest risks banks have. In this module learn about credit spreads, recovery rates and default probabilities.
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1. Credit spreads, recovery rates and default probabilities
2. The credit spread
3. The default probability
15th October 2009
If you don't work as a dealer you probably see transactions or their results after they have been completed. Your role may be in operations, finance, risk, audit or compliance. You expect dealers to be profitable, after all isn't this what they are paid for? You definitely know that they can lose money too! So how do dealers make profits and what are the implications for the business? There are three ways a dealer can make money:
21st September 2009
The swap spread is the difference in yield between the interest rate swap (IRS) market and the government bond market. Normally you would expect the swap rate to be higher than the yield on similarly dated government bonds but this relationship can and does change. When it does it not only affects dealers who speculate but it can affect those intending to hedge, so it may affect you. Let's see how.