A survey of cyclical effects in credit risk measurement model
AbstractWe survey both academic and proprietary models to examine how macroeconomic and systematic risk effects are incorporated into measures of credit risk exposure. Many models consider the correlation between the probability of default (PD) and cyclical factors. Few models adjust loss rates (loss given default) to reflect cyclical effects. We find that the possibility of systematic correlation between PD and LGD is also neglected in currently available models.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 126.
Length: 43 pages
Date of creation: Jan 2003
Date of revision:
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