Carmanet

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Corporate Summary Yuval Bar-Or Director Global
Client Solutions Moodys KMV May 2003
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Market Leadership

• Over 300 clients in 25 countries, users in over
  50 countries.
• 10 of top 10 global financial institutions.
• 75 of top 100 global financial institutions.
• Unique capability to support the adoption and
  integration of credit technology.

Here clients refers to ongoing subscriber
relationships. There are over 1,500 customers
of Moodys KMV software products
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International Client Base
Europe
North America
Japan
Middle East
SE Asia
South Africa
Over 300 Clients Globally
Australia
Users In Over 50 Countries
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Global Business
Asia 16
Americas 50
Europe 34
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Product Lines
Training 7
Platform 23
Risk 70
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Clients
Risk management Institutional portfolio
management Investment management

• Commercial Banks
• Investment Banks
• Insurance Companies
• Re-insurers
• Asset Managers

• Corporate Trade Credit Managers
• Credit Derivative Traders
• Energy Trading Companies
• Regulators (Federal Reserve, ECB, BIS, APRA)

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Credit Risk Basics Yuval Bar-Or Director Global
Client Solutions Moodys KMV May 2003
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• ????? ??????? (reputation risk)
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What is Credit Risk?

• Possibility that a counterparty will not make
  good on money owed. E.g., missed interest or
  principal payment.
• Change in credit quality with economic
  implications. E.g., change in bond value due to
  credit up- or down-grade.

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Some Market Participants

• Lenders/Credit originators commercial banks
• Debtors/Borrowers corporations, governments,
  banks
• Investors hedge funds, asset managers
• Traders/Dealers investment banks
• Credit Evaluators rating agencies

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• ?????? ?????
• ?????? (Credit Default Swaps,)
• ?????? (securitization CDO, CLO, CBO)

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Spectrum of Credit Risky Instruments

• The economics of private debt markets (more
  numerous, smaller obligors) are different from
  those of the capital markets

13
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• ?????? 95 ?????? ?? ????? ?? ??????? ?????
• ???? ??? ?????? ?? ?????? ?? ?????? ????
• ?????? ????? ??????? ????? (30,000 ?????)
  ??????? ??????? ??? ????? ?? 17 ??????? ??????

14
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• ?-30,000 ??????, 5,000 ?? ????? ???????? ?-25,000
  ????? ????????
• ?????? ????????? ??????? ?-13.5 ??????? ??????.
  10 ????? ??????? ??? ?????? ???.
• ?????? ????????? ??????? ?-3.5 ??????? ??????. 56
  ????? ??????? ??? ?????? ???.

15
??????? ?? ?????

• ???? 2001 ?????? ???? ?? ????? ???"? ??? ???? ??
  5.74 ??????? ????
• (Treasury bills, Treasury notes, Treasury bonds)

16
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• ????? ???, ???? ?????? ????"? ?????? 2001 ???
  ???? ?? 14.8 ??????? ????
• ????? ?????? ????, ???? ??? ????????? ???????
  ?????, ????????, ???????

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Credit Derivatives

• ??? ??? ?????
• ???? ??? ?????? ????? (????? ??????)
• ???? ?-,
• Hedging or Speculation

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PAYMENTS
Protection Buyer pays an annual
premium to Protection Seller in return for
a payment if the underlying investment
defaults
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Uses of Credit Swaps
Other
Speculate
0.16
Hedge a Counterparty Credit
0.16
Exposure
0.18
Reduce Capital in Portfolio
0.20
Leverage
0.20
0.31
Hedge Credit Risk of Loans
0.33
Arbitrage Opportunity
0.34
0.48
Hedge Credit Risk of Bonds
0.50
Invest in an Asset Class
Increase Returns
0.00
0.20
0.40
0.60
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Credit Derivatives Market SizeNotional
Outstanding ( Bn)
Source GS Research Estimates
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Types of Credit Derivatives
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• ?????? ????? ?? (??????) ????? ???? ????
• ?????? ??????
• ????? ???, ????? ??????? ?????? ?????
  ?-volatility
• ??? ?????? ????, ??? ????? ?????? ???? ?????
  ????? ????? ????????.

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Enron Corp
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Enron Corp
EDF Credit Measure
Median EDF for BBB Firms
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Enron Corp
Median EDF for Single BB Firms
Median EDF for BBB Firms
EDF Credit Measure