Fixed income -credit risk
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Last updated 3:51 PM on 6/7/25
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6 Terms
1
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what is credit risk
risk of loss from a borrower’s failure to make full and timely payments
2
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expected loss (formula)
probability of default x loss given default
3
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what are the bottom-up 5Cs
capacity
capital
collateral
covenants
character
4
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what are the top-down 3Cs
conditions
country
currency
5
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what are zombie firms
companies that struggle to repay debt, relying on continued refinancing to stay afloat instead of generating sufficient profits to cover interest payments and principal
6
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what is the altman Z-score
a default prediction model
Z < 1,81 → high bankruptcy probability
Z >= 1,81 <= 3 → no clear bankruptcy risk
Z > 3 → low bankruptcy probability
Note 
Flashcards (21)