Technical paper/Credit risk
A fifty-year retrospective on credit risk models, the Altman Z-score family of models and their applications to financial markets and managerial strategies
This paper reflects upon the evolution of the Altman family of bankruptcy prediction models, as well as their extensions and multiple applications in financial markets and managerial decision making.
Calculating capital charges for sector concentration risk
This paper proposes a methodology to quantify capital charges for concentration risk when economic capital calculations are conducted within a multifactor Merton framework.
A general framework for constructing bank risk data sets
This paper proposes a general framework for constructing bank risk data sets, which provides an integrated process from data sources to comprehensive risk data sets.
Procyclicality of capital and portfolio segmentation in the advanced internal ratings-based framework: an application to mortgage portfolios
This paper investigates the procyclicality of capital in the advanced internal ratings based (A-IRB) Basel approach for retail portfolios, and identifies the fundamental assumptions required for stable A-IRB risk weights over the economic cycle.
An empirical study on credit risk management: the case of nonbanking financial companies
The aim of this paper is to predict future default behaviors of nonbank financial company customers using credit scores.
A new model for bank loan loss given default by leveraging time to recovery
In this paper, the author estimates a two-equation system: one for LGD that incorporates time to recovery as one of the model explanatory variables, and the other for time to recovery using survival models that address data censoring.
Default contagion among credit modalities: evidence from Brazilian data
The aim of this paper is to assess the impact of defaulting on one personal credit modality on future defaults on other modalities. Using Brazilian microdata, the authors run a logistic regression to estimate the probability of default on a given credit…
Forecasting corporate defaults in the German stock market
In this paper, the authors estimate and test several default risk models using new and unique data on corporate defaults in the German stock market.
Modeling dependent risk factors with CreditRisk+
In this paper, an extension of the CreditRisk+ model, called the mixed vector model, is proposed.
Consumer risk appetite, the credit cycle and the housing bubble
In this paper, we explore the role of consumer risk appetite in the initiation of credit cycles and as an early trigger of the US mortgage crisis.
Credit default prediction using a support vector machine and a probabilistic neural network
In this study, the authors address the fact that the ranking of classifiers varies for different criteria with measures under different circumstances, by proposing the simultaneous application of support vector machine and probabilistic neural network …
A copula approach to credit valuation adjustment for swaps under wrong-way risk
This paper deals with the credit valuation adjustment (CVA) of interest rate swap (IRS) contracts in the presence of an adverse dependence between the default time and interest rates: so-called wrong-way risk (WWR).
Nonlinear relationships in a logistic model of default for a high-default installment portfolio
This paper uses data on consumer credit along with generalized additive models to analyze nonlinear relationships and their effect on predicting the probability of default in the context of consumer credit scoring.
A latent variable credit risk model comprising nonlinear dependencies in a sector framework with a stochastically dependent loss given default
This paper proposes a latent variable credit risk model for large loan portfolios. It employs the concept of nested Archimedean copulas to account for both a sector-type dependence structure and a copula-dependent stochastic loss given default (LGD).
When banks venture beyond home turf: consequences for loan performance
In this paper, the authors analyze the credit risk of Japanese regional banks when they lend to areas outside their original operational bases.
Asset price bubbles and the quantification of credit risk capital with sensitivity analysis, empirical implementation and an application to stress testing
This paper presents an analysis of the impact of asset price bubbles on standard credit risk measures.
Rating momentum in the macroeconomic stress testing and scenario analysis of credit risk
This paper focuses on the corporate stress testing models for credit risk.
A model combination approach to developing robust models for credit risk stress testing: an application to a stressed economy
This paper uses a model combination approach to develop robust macrofinancial models for credit risk stress testing.
Financial distress pre-warning indicators: a case study on Italian listed companies
This paper focuses on the ability of accounting ratios to predict the financial distress status of a firm as defined by the law.
Crunching mortality and life insurance portfolios with extended CreditRisk+
Jonas Hirz, Uwe Schmock and Pavel Shevchenko present a summary of actuarial applications of the extended CreditRisk+ model
Systemic risks in CCP networks
Barker, Dickinson, Lipton and Virmani propose a credit and liquidity risk model for CCPs
Consensus information and consensus rating: a simulation study on rating aggregation
This paper explores the aggregation of different single ratings to a ‘consensus rating’ to get a higher precision of a debtor’s default probability. It builds upon the methodology published by Grün et al, 2013 and Lehmann and Tillich, 2016.
Benchmarking the loss given default parameter for mortgage loan portfolios under stress
The authors analyze the impact of a decline in property prices that leads to stressed recovery rates for collateral on the loss given default (LGD) parameter in portfolios of mortgage loan.