A survey of cyclical effects in credit risk measurement model

Preprint

1 January 2003

preprint

Published in RePEc

Abstract

We 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.

Keywords

CREDIT RISK MEASUREMENT
MEASUREMENT MODEL
RISK MEASUREMENT
CYCLICAL EFFECTS
SYSTEMATIC RISK
EXPOSURE
SURVEY

All Related Versions

Version 1, 2003-01-01, RePEc

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