A trick too far

Monolines

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Monoline insurers have pulled off some dazzling tricks over recent years. Having moved out from their traditional business of wrapping municipal bonds, long-established monolines entered into the higher-margin arena of structured finance. With onlookers aghast, a neat tap of the wand caused dealer exposures to collateralised debt obligations of asset-backed securities (CDOs of ABSs) to disappear. But with heightening losses on US subprime mortgages, these exposures have leapt out to startle bond

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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