Recent Advances in Credit Risk Modeling

32 Pages Posted: 19 Aug 2009

See all articles by Christian Capuano

Christian Capuano

Swiss Financial Market Supervisory Authority (FINMA)

Jorge A. Chan-Lau

International Monetary Fund (IMF) - International Capital Markets Department

Jose Giancarlo Gasha

affiliation not provided to SSRN

Carlos I. Medeiros

International Monetary Fund (IMF)

Andre Oliveira Santos

International Monetary Fund (IMF)

Marcos Souto

George Washington University - School of Business; International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2009

Abstract

As is well known, most models of credit risk have failed to measure the credit risks in the context of the global financial crisis. In this context, financial industry representatives, regulators and academics worldwide have given new impetus to efforts to improve credit risk modeling for countries, corporations, financial institutions, and financial instruments. The paper summarizes some of the recent advances in this regard. It considers modifications of structural models, including of the classical Merton model, and efforts to reconcile the structural and the reduced-form models. It also discusses the reassessment of the default correlations using copulas, the pricing of credit index options, and the determination of the prices of distressed debt and estimation of recovery values.

Keywords: Asset prices, Bankruptcy, Bonds, Credit risk, Currencies, Economic models, External debt, Financial crisis, Financial risk, Financial sector, Sovereign debt

Suggested Citation

Capuano, Christian and Chan-Lau, Jorge Antonio and Gasha, Jose Giancarlo and Medeiros, Carlos I. and Santos, Andre Oliveira and Souto, Marcos, Recent Advances in Credit Risk Modeling (August 2009). Available at SSRN: https://ssrn.com/abstract=1457585 or http://dx.doi.org/10.2139/ssrn.1457585

Christian Capuano

Swiss Financial Market Supervisory Authority (FINMA) ( email )

Einsteinstrasse 2
Bern, 3003
Switzerland

Jorge Antonio Chan-Lau

International Monetary Fund (IMF) - International Capital Markets Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Jose Giancarlo Gasha (Contact Author)

affiliation not provided to SSRN

No Address Available

Carlos I. Medeiros

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Andre Oliveira Santos

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Marcos Souto

George Washington University - School of Business ( email )

Washington, DC 20052
United States

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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