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Recent Advances in Credit Risk Modeling

Author/Editor: Capuano, Christian | Chan-Lau, Jorge A. | Gasha, Jose Giancarlo | Medeiros, Carlos I. | Santos, Andre | Souto, Marcos
Authorized for Distribution: August 1, 2009
Electronic Access: Free Full Text (PDF file size is 725KB)
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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.
 
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Series: Working Paper No. 09/162
Subject(s): Asset prices | Bankruptcy | Bonds | Credit risk | Currencies | Economic models | External debt | Financial crisis | Financial risk | Financial sector | Sovereign debt
Author's keyword(s): credit risk
 
English  
    Published:   August 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009162   Pages:   31
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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