Portfolio credit risk models

By Greg M Gupton

credit-derivatives-book
This article was first published as a chapter in Credit Derivatives, by Risk Books.

There are several portfolio-level methodologies for estimating a portfolio’s CreditVAR (value-at-risk due to credit quality changes). The natural question is, “which framework is best?” In a very significant way, this is driven by the data that are available. If the best data for evaluating credit quality are categorical credit ratings (either from credit rating agencies or a bank’s own internal ratings), then t

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