An Analytic Approach to Rating Transitions

  • Carsten Binnenhei
Part of the Springer Finance book series (FINANCE)

Summary

Extending CreditRisk+ to a multi-state model allows one to incorporate credit quality changes into the calculation of portfolio credit risk. Several modifica­tions to the original methodology are proposed to make the extension to a mark­to-market model tractable. The distribution of portfolio value changes is obtained analytically by a two-dimensional recursion algorithm.

Keywords

Migration Covariance Convolution 

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References

  1. 1.
    Credit Suisse Financial Products. CreditRisk+: A credit risk management framework. London, 1997. Available at http://www.csfb.com/creditrisk.
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    G. Giese. Enhancing CreditRisk+. Risk, 16 (4): 73–77, April 2003.Google Scholar
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    M. B. Gordy. A comparative anatomy of credit risk models. J. Banking e1 Finance, 24: 119–149, 2000.CrossRefGoogle Scholar
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    B. Rolfes and F. Bröker. Good migrations. Risk, 11 (11): 72–73, 1998.Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2004

Authors and Affiliations

  • Carsten Binnenhei

There are no affiliations available

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