Student Lounge Term about credit risk and collateral !

Term about credit risk and collateral !

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    • Dan
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      Hey guys, I need help with something. My boss talkted to me about a term, that I know what it means, but I forgot the word… and I can’t seem to find it anywhere…

      It’s a three letter term. It’s the % of the value of a collateral that the lender lends to a borrower

      The thing is that I asked him twice already, and both times someone immediatelly aproached me with something else… so I had no time to memorize it or write it down.

      Well, also if you have some material about this subject (credit analyst for corporate loans)… anything is good 🙂

      Thank you

    • vincentt
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      3 letter? Could it be LTV? Loan-to-value ?

    • Sophie Macon
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      lol – I think @vincentt is right, although I’m not sure if your definition makes sense. Why would Lender lend collateral to the borrower?

      Loan to value is basically the ratio of loan value (offered by lender) to asset value (borrower’s asset) in a secured loan. A higher LTV means higher risk for the Lender.

    • vincentt
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      @sophie it’s very likely for mortgages but i wouldn’t be too sure if he was referring to other areas.

      I think he meant the % value of the collateral (e.g. property) to the borrower. So if the property is worth £400k, the lender lends £300k to the borrowing so that’s an LTV of 75%.

    • Zee Tan
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      My vote is for LTV. @Dan let us know if that’s right!

    • Dan
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      @vincentt @Sophie @Zee

      Hey sorry for the delay, too much CFA studying…

      I am 99% sure that LTV is right. @Sophie, my definition has some issues in the wording, it sounded kind of right in my head :p

      Thank you all!

    • Sophie Macon
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      No probs @Dan, happy studying!

    • Zee Tan
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      Brought back memories of my risk + Basel II days….

    • petersmith
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      There is going to be an increase in the cost and in the demand for high-grade collateral, but to what level will depend on how much the market ultimately takes off. If the market takes off and the requirements are up in the trillions of dollars, then you are going to see an increase in demand and a subsequent shortage of collateral in the market. But, if those numbers are not as high, then this will be less of an issue. If there is a shortfall, then obviously the costs will rise. However, several efficiencies around the management of collateral can be provided to market participants or <a href=”http://www.pawnbrokerstoday.com/”>Pawnbrokers</a>to allow them to access and manage their collateral process in a cost-effective manner, while also supporting their needs around essential services such as segregation and optimisation.

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