Product Details

by Townsend Walker, Ph.D.
Fall 2001 issue

The purpose of this article is to provide an overview of how you might go about analyzing the risks and returns of the leases in your port-folio. Each of the principal risks is considered and suggestions offered on how you might go about modeling them.The returns and risks of each lease are then considered in the context of the portfolio. Due to the presence of different lessees and different equipment in your portfolio, its overall risk is less than the sum of the individual risks. Portfolio theory provides a way to obtain the most return for the amount of risk you are willing to take, and it shows the trade-offs between different levels of return and risk.This article also explains a number of different ways to manage a portfolio of leases - from securitization to credit derivatives to partnerships.