Overview/Description Making credit decisions requires proficiency in both quantitative and qualitative analysis. Qualitative analysis is a nonfinancial credit analysis that complements the quantitative analysis and is regularly used by banks and other financial institutions that lend money to businesses. In addition to other information about the entity, the analysis also reveals important information such as whether the business being analyzed has competent management and whether it is likely to produce enough cash flow to service any credit that may be extended. After credit decisions have...

Overview/Description Asset-based loans, such as accounts receivable loans and inventory-based loans are ways for companies to free up cash flow that can be used for funding other working capital requirements. These specialized loans, in which a company's noncash assets that are expected to be converted to cash sometime in the future – such as accounts receivable and inventory – are converted into cash by a bank. This type of lending is generally used when lending from other places in the market is difficult or impossible. Another form of lending is participation lending, which allows many...

Overview/Description Credit derivatives have seen immense growth over the past decade. They are used by hedgers to protect against credit risk and by speculators to take on credit exposure in the hope of earning high returns. Credit derivatives are also used by other financial institutions, such as banks, as a means of funding. Credit derivatives typically reference fixed income securities as a contract's underlying asset because of the inherent credit risk that arises from fixed income security ownership. Total return swaps have emerged as one of the most commonly known, and used, types of...

Overview/Description The structured derivatives market gained traction in the early 2000's due to its ability to convert security features, primarily cash flows and maturity, to meet investors' specific needs. This market is composed of complicated combinations of securities and derivatives, allowing for a large degree of flexibility to cater to investor demands. Because potential risks have also become increasingly complicated to identify and measure, it is important for individuals involved in these structured deals to have a good grasp of the dynamics of various transactions and how they...