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Credit risk

Agencies rethink market risk rating methods

The three largest global rating agencies are reconsidering their approach to rating structures exposed to fluctuations in market value, with potentially unpalatable results for holders and arrangers of various structured credit products.

The probability approach to default probabilities

Default estimation for low-default portfolios has attracted attention as banks contemplate the requirements of Basel II's internal ratings-based rules. Here, Nicholas Kiefer applies the probability approach to uncertainty and modelling to default…

Uncovering PD/LGD liaisons

Francisco Sanchez, Roland Ordovas, Elena Martinez and Manuel Vega consider the presence of correlation between default and recovery through the familiar variance of loss formula. Business cycle dependence permits a neat decomposition of the variance…

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