Customer Reviews

Internal Credit Risk Models: Capital Allocation and Performance Measurement

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This book is the most comprehensive literature I have seen for credit risk modeling. It covers from the basic BIS regulatory capital framework to the state-of-the-art credit risk models. Numerous worked examples demonstrate the calculation for different risk weighted capitals with or without netting clearly. Well-known credit models such as KMV, CreditMetric and CreditRisk+ are rigorously explained. Advanced issues like default correlation, joint credit migration and loss tail events are also addressed appropriately. With the general framework, economic capital and risk adjusted performance measurement can be quantified. This book is full of concise but descriptive flow charts and diagrams for implementation purpose. I strongly recommend this book to those who want to understand and implement an internal credit model for capital regulatory and allocation purpose.

It provides a coherent framework for thinking about and modeling bank credit risk. It describes how to model default probabilities, expected and unexpected losses, time effects, default correlation, loss distribution and RAROC measures. The writer is a practioner and makes simple and important observations about the important issues. The text is clear and mathematics is used as example, not as explanation.

Detailed, but not overly mathematic.

Good coverage of all the main points required of any good credit risk measurement, management, and reporting system. Would recommend this book to anyone who might be using KMV's Portfolio Manager product, or for someone who's creating/programming a new credit risk management/reporting system and needs a good framework from which to copy from.