Recent Advances in Credit Risk Modeling

Author/Editor:

Jose Giancarlo Gasha ; Andre O Santos ; Jorge A Chan-Lau ; Carlos I. Medeiros ; Marcos R Souto ; Christian Capuano

Publication Date:

August 1, 2009

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2009/162

Subject:

Asset prices Asset valuation Credit Credit risk Options

English

Publication Date:

August 1, 2009

ISBN/ISSN:

9781451873092/1018-5941

Stock No:

WPIEA2009162

Pages:

31

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