A new look at credit risk capital

In the second of two articles on Standard & Poor’s refinement of analytical methodology, John Kennedy discusses an updated approach to evaluating credit risk capital

Rating agency Standard & Poor’s (S&P) is refining its methodology for analysing the capital-at-risk of energy trading and marketing firms, given the dynamic nature of the industry. In addition to its refinement on determining market risk (see EPRM October 2002, page 41), S&P has updated its method of assessing an energy trader’s credit risk – specifically, how it quantifies the capital that is at risk from counterparty exposure.

The fundamental methodology has not changed. Calculating the amount

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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