Modeling Credit Risk Factors
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Usually investors must be willing to take risks for their investments. Therefore, they should be adequately compensated. But what is a fair premium for risk compensation ? To answer this question it is essential to determine the key sources of risk. As we are concerned with credit risk, this section is devoted to the identification of credit risk factors. We show the current practice of credit risk factor modeling and present these methodologies within a rigorous mathematical framework.
KeywordsRecovery Rate Business Cycle Credit Risk Modeling Transition Term Structure
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