Credit risk
Confidence intervals for corporate default rates
Rating agency default studies provide estimates of mean default rates over multiple time horizons but have never included estimates of the standard errors of the estimates. This is due at least in part to the challenge of accounting for the high degree…
Credit risk modelling
Sponsored Statement
Uncovering PD/LGD liaisons
Francisco Sanchez, Roland Ordovas, Elena Martinez and Manuel Vega consider the presence of correlation between default and recovery through the familiar variance of loss formula. Business cycle dependence permits a neat decomposition of the variance…
Calibration of PD term structures: to be Markov or not to be
A common discussion in credit risk modelling is the question of whether term structures of default probabilities can be satisfactorily modelled by Markov chain techniques. Christian Bluhm and Ludger Overbeck show that empirical multi-year default…
The data puddle challenge
The loss event taxonomies currently in use are inadequate. The worst problem is the lack of clarity with regard to the boundary conditions between risk event categories. Tara McLenaghen explores the issues
The underlying dynamics of credit correlations
Research Papers
Loan portfolio value
Using a conditional independence framework, Oldrich Vasicek derives a useful limiting form for the portfolio loss distribution with a single systematic factor. He then derives a risk-neutral distribution suitable for traded portfolios, and shows how…
Defining the boundaries
Him Chuan Lim, Basel II programme director at DBS Bank in Singapore, talks to Ellen Davis about operational risk's complex relationship with both credit risk and market risk
Profile - Savvy with synthetics
Credit Risk