Credit Risk

Authored by: Thierry Roncalli

Handbook of Financial Risk Management

Print publication date:  April  2020
Online publication date:  April  2020

Print ISBN: 9781138501874
eBook ISBN: 9781315144597
Adobe ISBN:




In this chapter, we give an overview of the credit market. It concerns loans and bonds, but also credit derivatives whose development was impressive during the 2000s. A thorough knowledge of the products is necessary to understand the regulatory framework for computing the capital requirements for credit risk. In this second section, we will therefore compare Basel I, Basel II and Basel III approaches. The case of counterparty credit risk will be treated in the next chapter, which focuses on collateral risk. Finally, the last section is dedicated to the modeling of credit risk. We will develop the statistical methods for modeling and estimating the main parameters (probability of default, loss given default and default correlations) and we will show the tools of credit risk management. Concerning credit scoring models, we refer to Chapter 15, which is fully dedicated on this topic.

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