Models of Credit Risk Measurement

Alina Hagiu

Ovidius University Annals, Economic Sciences Series, 2011, vol. XI, issue 1, 912-917

Abstract: Credit risk is defined as that risk of financial loss caused by failure by the counterparty. According to statistics, for financial institutions, credit risk is much important than market risk, reduced diversification of the credit risk is the main cause of bank failures. Just recently, the banking industry began to measure credit risk in the context of a portfolio along with the development of risk management started with models value at risk (VAR). Once measured, credit risk can be diversified as any other financial risk. The main purpose of the paper is to present the most important methods of credit risk measurement used in the banking industry: Credit Metrics, developed by J.P. Morgan, Portfolio Manager developed by KMV company, Credit Risk+ developed by Credit Suisse First Boston and Credit Portfolio View developed by the consultancy company McKinsey.

Keywords: credit risk, models, management, strategy (search for similar items in EconPapers)
JEL-codes: G11 G24 G32 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:11:y:2011:i:1:p:912-917

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