Models of Joint Defaults in Credit Risk Management: An Assessment

University of Heidelberg Working Paper No. 358

45 Pages Posted: 17 Aug 2001

See all articles by Ulrich Erlenmaier

Ulrich Erlenmaier

University of Heidelberg - Alfred Weber Institute for Economics

Date Written: August 2001

Abstract

In this paper we review the models of joint defaults of the current major industry-sponsored credit risk frameworks. Recognizing the need for further improvements of these models, we address the following issues. First, we identify the most important modeling drawbacks that could be fixed on a short-term basis. Second, we analyze which of the proposed models is the conceptually most promising basis for next-generation models. Concluding that the KMV methodology is the most suitable to go forward, we set out a research agenda aiming at further improvements and at extending the KMV model to non-quoted firms.

Keywords: Credit portfolio management, Credit risk models, Joint defaults

JEL Classification: G11, G21, G28

Suggested Citation

Erlenmaier, Ulrich, Models of Joint Defaults in Credit Risk Management: An Assessment (August 2001). University of Heidelberg Working Paper No. 358. Available at SSRN: https://ssrn.com/abstract=279628 or http://dx.doi.org/10.2139/ssrn.279628

Ulrich Erlenmaier (Contact Author)

University of Heidelberg - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany
+49 6221 542958 (Phone)
+49 6221 543578 (Fax)

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