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| RATING BASED MODELING OF CREDIT RISK
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 Theory and Application of Migration Matrices
To order this title, and for more information, click here
By
Stefan Trueck, Postdoctoral Research Fellow, School of Economics and Finance, Queensland University of Technology, Australia
Svetlozar Rachev, Chair-Professor at the University of Karlsruhe in the School of Economics and Business Engineering
Included in series
AP Advanced Finance,
Description
In the last decade rating-based models have become very popular in credit risk management. These systems use the rating of a company as
the decisive variable to evaluate the default risk of a bond or loan. The popularity is due to the straightforwardness of the approach,
and to the upcoming new capital accord (Basel II), which allows banks to base their capital requirements on internal as well as external
rating systems. Because of this, sophisticated credit risk models are being developed or demanded by banks to assess the risk of their
credit portfolio better by recognizing the different underlying sources of risk. As a consequence, not only default probabilities for
certain rating categories but also the probabilities of moving from one rating state to another are important issues in such models for
risk management and pricing.
It is widely accepted that rating migrations and default probabilities show significant variations through
time due to macroeconomics conditions or the business cycle. These changes in migration behavior may have a substantial impact on the
value-at-risk (VAR) of a credit portfolio or the prices of credit derivatives such as collateralized debt obligations (D+CDOs). In this
book the authors develop a much more sophisticated analysis of migration behavior. Their contribution of more sophisticated techniques
to measure and forecast changes in migration behavior as well as determining adequate estimators for transition matrices is a major contribution
to rating based credit modeling.
Audience
Primary readership:
Both researchers, practitioners and financial institutions in the area of banking, mathematical finance, risk management,
especially credit risk management.
Secondary readership:
The book may also be used as textbook in an advanced course on credit risk
or credit risk modelling..
Contents
1. Introduction: Credit Risk Modeling, Ratings and Migration Matrices
2. Rating and Scoring Techniques
3. The New Basel Capital Accord
4. Rating Based Modeling
5. Migration Matrices and the Markov Chain Approach
6. Stability of Credit Migrations
7. Measures for Comparison
of Transition Matrices
8. Real World and Risk-Neutral Transition Matrices
9. Conditional Credit Migrations: Adjustments and Forecasts
10. Dependence Modeling and Credit Migrations
11. Credit Derivatives
| Bibliographic details |
Hardbound, 280 pages, publication date: DEC-2008
ISBN-13: 978-0-12-373683-3
ISBN-10: 0-12-373683-8
Imprint: ACADEMIC PRESS
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| Price and Ordering |
Price:
GBP 39.99
USD 79.95
EUR 58.95
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Last update: 7 Oct 2008
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