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Introduction to Credit Risk Modeling
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The first edition of this book appeared eight years ago. Since then the banking industry experienced a lot of change and challenges. The most recent financial crisis which started around May 2007 and lasted in its core period until early 2009 gave rise to a lot of scepticism about whether credit risk models are appropriate to capture the true nature of risks inherent in credit portfolios in general and structured credit products in particular. In a recent article we discuss common credit risk modeling approaches in light of the most recent crisis and invite readers to participate in the discussion; see [26].
A key observation in a discussion like the one in [26] is that the universe of available models and tools is sufficiently rich for doing a good job even in a severe crisis scenario as banks recently experienced it. What seems to be more critical is an appropriate model choice, parameterization of models, dealing with uncertainties, e.g., based on insufficient data, and communication of model outcomes to decision makers and executive senior management. These are the four main areas of challenge where we think that a lot of work and rethinking needs to be done in a “post-crisis” reflection of credit risk models.
In the first edition of this book we focused on the description of common mathematical approaches to model credit portfolios. We did not change this philosophy for the second edition. Therefore, we left large parts of the book unchanged in its core message but supplemented the exposition with new model developments and with details we omit- ted in the first edition. The aforementioned four areas of challenge in a “post-crisis” reflection of credit risk models would justify another separate exposition in book form and it should be clear that a second edition of an existing book cannot be an appropriate substitute for that. However, we included a few comments in the text where appropriate.
Christian Bluhm Ludger Overbeck and Christoph Wagner - Personal Name
2nd Edition
NONE
Introduction to Credit Risk Modeling
Management
English
Taylor & Francis Group, LLC
2010
USA
1-386
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