MARS Basics
2 reasons you would pitch MARS to assess market risk?
1. Integrated market data
2. Flexibility in defining shocks
3. View portfolio hierarchy/tree diagram
4. Granularity down to security level
5. What-if analysis
Can anyone give us 2-3 types of transactions that pose credit risk to investors?
1. Corporate lending
2. Securitized products- (i.e. collateralized securities)
3. Derivative contracts
4. Commercial lending- (i.e. working capital lines of credit, term loans, commercial real estate mortgages)
5. Margin lending- (i.e. reviews amount of loan, intended purpose)
6. Consumer lending- (i.e. mortgages)
What are some of the features/benefits of MARS' Credit Analytics? (At least 3)
1. Early warning of default through PD monitoring
2. Time series analysis & peer comparisons
3. Improve counterparty analysis
4. Enhance credit scorecards
5. Benchmark against peers + internal analytics
6. Parameter scenarios to evaluate creditworthiness
How can I look at the default risk of a single company?
DRSK<GO>
How far back can we go on a lookback period for VaR in MARS?
2007
List 3 of the 6 types of key credit risk measures?
1. Concentration Risk
2. Credit Risk
3. Counterparty Risk
4. Sovereign Default Risk
5. Supply Chain Risk
6. Settlement Risk
Yes- via UI (User Interface) and API
What is spread risk, and what is the BBG function to see a yield and spread analysis?
-The gap between a debt instrument's yield and the yield of a default-free government bond.
-YAS<GO>
Who can explain what credit valuation adjustment aka CVA is? What are two factors that can change the CVA?
It is the extra spread investors need to account for counterparty risk.
- Interest rate depending on how sensitive the underlying is
- CDS used to hedge the underlying instrument
Two key components of credit risk?
1. Default Risk- probability that borrower fails to make financial obligation
2. Loss Given Default- portion of a bond's value that an investor loses
Two functions you can use to create custom credit risk scenarios to analyze in MARS?
SHOC<GO> & BRM<GO>
Do we have a creditworthiness indicator for entities unrated by major agencies?
MIPD<GO>
(Market Implied Probability of Default)
The platform in BBG that's able to acquire positions data from AIM or TOMS and show enterprise wide risk data?
BRM<GO>
General use cases
- What-if-analyses to run scenarios/shocks
- Standard risk measures such as VaR and the Greeks
Does BBG provide values for Loss Given Default? Where do I pull LGDs?
-LGD: calculation to project losses due to borrowers defaulting on loans/firms defaulting on bonds
-LDG = 1 - Recovery Rate
-IRSK<GO>
What is ECL, and is it covered in MARS Credit Risk analytics?
-ECL (expected credit loss) = probability-weighted estimate of credit losses over the expected life of a financial instrument
-Supported in MARS
Where can I see the default risk of a group of securities by sector, region, reference date and more?
DRAM<GO>
(default risk monitor)
Can anyone give a range of defaults & bankruptcies that are covered by Bloomberg's database?
-14,000 defaults
-120,000 bankruptcy records
What is credit spread risk, and can anyone name 3 factors that can cause it to worsen?
-The risk that spreads will widen, decreasing the value of a bond.
-3 factors- worsening macroeconomic trends, decline in the financial markets, credit downgrades
Can I customize how I view DV01s in the MARS Credit Risk report?
-Yes.
-DV01 = Dollar Value of 1bp-measures interest rate risk of bond/bond portfolio by estimating chg in $ terms in response to chg in yield by 1bp
-You can exclude DV01 calcs for sovereign bonds for hedged or investment grade credit portfolios.
-You can also zero-out DV01 for certain countries & currencies, maintain overrides for countries that you see to have credit risk.
-Done under MARS > Pricing Settings > Credit > Credit Overrides
Which tool in MARS would you advise clients to use to manage counterparty risk arising from OTC derivatives?