Credit risk management from the bank's perspective

This diploma thesis deals with problematics of credit risk management in banks, as of the most significant risk the banks oppose every day. The main aim of this thesis is to define the main techniques, tools and methods which are applied by banks when dealing with credit risk. The first part of the thesis defines the term and concept of credit risk, mentions its crucial specifics and common mistakes made during the process of its management. The second part provides detailed demonstration of the tools used for credit risk measurement and evaluation, credit models and brings up their specific features, highlights benefits and drawbacks. The second chapter also contains information regarding hedging instruments, which are used to reduce the impact of credit risk for the bank’s performance. Last part demonstrates credit risk management in practice illustrated by the example of the chosen bank.