Review and Implementation of Credit Risk Models of the Financial Sector Assessment Program (FSAP)

The paper presents the basic Credit Risk+ model, and proposes some modifications. This model could be useful in the stress-testing financial sector assessments process as a benchmark for credit risk evaluations. First, we present the setting and basic definitions common to all the model specificatio...

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Bibliographic Details
Main Authors: Avesani, Renzo G, Liu, Kexue, Mirestean, Alin
Format: eBook Book
Language:English
Published: Washington International Monetary Fund 01.05.2006
Edition:1
Subjects:
Bernoulli Distribution
Credit
Default Probabilities
Economic Models
Financial Sector
Management
Mathematical models
Poisson Distribution
Portfolio Credit Risk
Financial Institutions and Services: General
Banks
Mathematical Methods and Programming: General
Computational Techniques
Micro Finance Institutions
Portfolio Choice
Investment Decisions
Other Depository Institutions
Mortgages
ISBN:9781451863949, 9781451909159, 1451909152, 9781452765280, 1451863942, 1452765286
Online Access:Get full text
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Summary:The paper presents the basic Credit Risk+ model, and proposes some modifications. This model could be useful in the stress-testing financial sector assessments process as a benchmark for credit risk evaluations. First, we present the setting and basic definitions common to all the model specifications used in this paper. Then, we proceed from the simplest model based on Bernoulli-distributed default events and known default probabilities to the fully-fledged Credit Risk+ implementation. The latter is based on the Poisson approximation and uncertain default probabilities determined by mutually independent risk factors. As an extension we present a Credit Risk+ specification with correlated risk factors as in Giese (2003). Finally, we illustrate the characteristics and the results obtained from the different models using a specific portfolio of obligors.
ISBN:9781451863949
9781451909159
1451909152
9781452765280
1451863942
1452765286