Credit Risk Loss Experience Study for Alternative Investments
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Background and Purpose
Non-traditional investments could bring additional yield but may contain risk profiles that are not as easy to assess as the more traditional investments. Credit risk is one of the important risks to understand to adequately assess whether the alternative instruments are appropriate for investment portfolios.
Research Objective and Deliverables
This research would collect and value expected and real cash flows of alterative investments to analyze their credit risk loss experience. Asset classes to be analyzed and compared include—whether or not publicly traded—private placement, commercial mortgages, commercial and private mortgage-backed securities, equity lines of credits, etc. The report would include:
- Quantified frequency and severity of defaults for each of the non-traditional asset classes
- Comparison of results to more traditional investments for insurance and pensions.
Target Audience and Impact
Investment departments of insurance companies and pension plans need this information to assess the viability and economic interest of various asset classes and their relative risk/return compared to other investments. Investment banks need this information to improve structured assets and alternative investments to meet clients’ needs.
Estimated Cost
$20,000–$30,000
Similar Research Topics the Institute Has Published
2003–12 Credit Risk Loss Experience Study: Private Placement Bonds, January 2016