MARS Basics
Why BBG/MARS for market risk?
(*Name 2 out of the 5 main reasons)
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
Name 3 key credit risk activities. (There are 6 total).
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)
Name at least 3 of the 6 benefits of MARS Credit Analytics.
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 metrics.
(Hint- 3 C's, 3 S's)
1. Concentration Risk
2. Credit Risk
3. Counterparty Risk
4. Sovereign Default Risk
5. Supply Chain Risk
6. Settlement Risk
Are MARS Credit Risk reports available outside the Terminal?
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>
Name & define the Greeks.
-Delta = sensitivity of derivative's price to change of 1bp in the underlying
-Vega = sensitivity of derivative's price to 1% chg in volatility (V for Volatility/Vega)
-Gamma = chg of delta with respect to 1% chg in the underlying instrument
What are the 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
What function can you use to create custom credit risk scenarios to analyze in MARS?
SHOC<GO>
Do we have a creditworthiness indicator for entities unrated by major agencies?
MIPD<GO>
(Market Implied Probability of Default)
What function provides market risk analytics and a reporting system?
BRM<GO>
What is loss given default and how is it calculated?
How can I see LGD in BBG?
-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)
How many defaults & bankruptcies are covered in Bloomberg's database?
-14,000 defaults
-120,000 bankruptcy records
What is credit spread risk, and what are 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
What is the BBG function to see a company's credit profile and subsidiary ratings?
CRPR<GO>