清华大学货币银行学讲义（考研必备）ch7 risk structure

1,risk premium: A risk premium is defined as the differential in yield between a security being studied and a default-free one, with all factors other than default risk being held constant. a securitys risk premium is the interest rate differential between it and risk-free security that has identical term of maturity. The risk premium is the cost of default risk for borrower. It can be measured according to the possibilities of default of borrowers, to the debt issuers credit reputation. The risk structure can be demonstrated with a group of yield curve or the interest rate of different securities at a horizon of time.,ch7. The structure of interest rate: risk structure,7.1 risk structure: risk premium （风险溢价）,2,Defining riskRisk is a measure of uncertainty about the future payoff to an investment, measured over some time horizon and relative to a benchmark. Risk is arises from the uncertainty over some time horizon, about the future payoff of investmenta measure that can be quantified Relative to a benchmark (ex. risk free investment),Measuring riskPossibilities, probabilities and expected value (mean)Variance and standard deviation Value at risk,3,Risk of debt securities:,4,A credit rating represents the agencys opinion about the creditworthiness of an obligor with respect to a particular debt security or other financial obligation. Standard & Poors, Moody is the main rating agents for credit rating,7.2 Rating and probabilities of default,Table 7.1,Table 7.2,5,7.3 How they rating? Merton 1974, financial ratio, sector characteristic,financial ratio,6,sector characteristic,7,Floating of rating,8,7.4 The impact of ratings on yield:,Default probabilities,Rating of debt,9,Ratings and risk structure, ratings and yields,Figure 7.2, P155,Effect of Ratings on bond price and yield:,Downgrade is likely to have negative impact on bond priceupgrade is likely to have positive impact on bond priceSupply and demand, regulation. Contamination by other effects,Risk structure:AAA vs. T-bond:1%BBB vs. AAA: 2%,10,7.5 Risk premium & business cycle,Cyclical Behavior of Risk PremiumsProbabilities of Default (PD) do be influenced by business cycle. However, whether the cycle influenced the risk premium?“Through-the-cycle” effect: if rating assess the business-risk sensitivity, the rating has already including the cycle factors, rating try to mitigate the effect of cycle, (cycle effect can be filtered out) there will be not much change with the fluctuation of cycle, hence the “average” rating will not change as much, and risk premium will also not fluctuate as much.However, if there is persistent downturn in the economy, microeconomic conditions not just temporary change, PD may be significantly raise, the absolute level of risk within a rating category fluctuates: overshoot or undershoot around the average rating. Risk premium will also overshoot or undershoot.,11,假定一个贷款（包含了可以分散的信贷风险）Risk free interest rate: rBorrower refunds C1、C2Cn at time t1, t2, .tnWhen there is default, refund zeroP: prossibility to refund loan折扣因子是conclusion：if default prossibility follow the Poisson Process（泊松分布）Risk premium will has no relation with the financial situation of firms. It should be equal to the system risk of whole group of firms风险溢价就与贷款的特性无关，它等于泊松分布的密度。,Additional case: Risk premium of loan for SMEs： a preliminary model,Assumption of the model：The return of loan is a random variable， the risk of loan can be perfective diversified.Default rate of a single firm can not absevered but the default rate of the cateloged firms group can be oberseved. Recover rate is