About This Chapter
Credit Risk - Chapter Summary
If you're looking for an overview of credit risk, this chapter can get you quickly up to speed. After defining the concept of credit risk, you'll be walked through the fundamentals of individual credit risk, portfolio loan risk and the modern portfolio theory. Our expert instructors also break down some basic methods for credit risk management. All of our engaging lessons come with short quizzes that help you retain the information. You can review these lessons online using any computer or mobile device, and if you have any questions throughout the chapter, you can use our Ask the Expert feature to get some help. When you're finished with the lessons and quizzes, you should be able to:
- Recognize examples of credit risk
- Differentiate between individual credit risk and portfolio loan risk
- Define modern portfolio theory
- Manage credit risk
1. What is Credit Risk? - Definition & Examples
When you go and buy a car or a house, companies will assess your credit risk before allowing you to make such a big purchase. Learn why and how they do this in this lesson.
2. Individual vs. Portfolio Loan Risk
In this lesson, we'll define loans and investments. You'll learn about four different types of risks that jeopardize a financial institution's profits. Additionally, we'll discuss migration analysis, a loss mitigation tool.
3. Modern Portfolio Theory: Definition & Examples
In this lesson, we will go over the foundations of modern portfolio theory. We will also look at how investors can use it to create an appropriate investment mix that optimizes risk.
4. Credit Risk Management Methods
In this lesson, we'll define bonds. You'll learn about the characteristics of bonds and their rating system. We'll also explore two risk related concepts: risk-neutral and real-world.
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Other chapters within the Financial Accounting: Help and Review course
- Introduction to Accounting: Help and Review
- Financial Statements in Accounting: Help and Review
- Mechanics of the Accounting Cycle: Help and Review
- Project Evaluation & Analysis
- Preparing Financial Statements: Help and Review
- Internal Controls in Accounting: Help and Review
- Merchandising Operations and Inventory in Accounting: Help and Review
- Current and Long-Term Liabilities in Accounting: Help and Review
- Adjusting Accounts & Preparing Financial Statements: Help and Review
- Taxation of Business Entities
- Accounting Changes & Errors
- Classifying Costs in Accounting
- Cost Accounting Methods
- Cash Flow Statements & Disclosures
- Asset & Inventory Management
- Small Business Financing
- Small Business Accounting
- Financial Reporting
- Banking, Insurance & Monetary Policy
- Types of Financial Risk
- Derivatives in Finance Overview
- Capital Markets in Risk Management
- Managing Financial Risk
- Financial Risk & Decision-Making