Credit risk scoring has gone a long way since Fair Isaac introduced the first commercial scorecard to assist banks in making their credit lending decisions over 50 years ago. It now becomes the cornerstone in modern credit risk management thanks to the advancement in computing technologies and availability of affordable computing power. Credit scoring is no longer only applied in assessing lend...

one of the most important issues always facing banks and financial institutes is the issue of credit risk or the possibility of failure in the fulfillment of obligations by applicants who are receiving credit facilities. the considerable number of banks’ delayed loan payments all around the world shows the importance of this issue and the necessary consideration of this topic. accordingly, many...

We examine the correlation in credit risk using credit default swap (CDS) data. We find that the observable risk factors at the firm, industry, and market levels and the macroeconomic variables cannot fully explain the correlation in CDS spread changes, leaving at least 30 percent of the correlation unaccounted for. This finding suggests that contagion is not only statistically but also economi...

The recent growth in diplomatic, civil and military conflicts presents evolving challenges for international business. These risks create new sources of country risk. Country risk, in this sense, is commonly associated with the risk faced by enterprises in developed countries while conducting their business operations in developing or politically volatile countries. Few studies, however, have b...

redit arrangements between a borrower and a lender are a prevalent part of the economy. A fundamental concern for any lender is the risk that the borrower fails to fully repay the loan as expected, a type of risk called credit risk. Thus, lenders want credit arrangements that are designed to compensate them for— and help them effectively manage—credit risk. In certain situations, central banks ...

Financial credit risk assessment has gained a great deal of attention. Many different parties have an interest in credit risk assessment. Banking authorities are interested because it helps them to determine the overall strength of the banking system and its ability to handle adverse conditions. Due to the importance of credit risk analysis, many methods were widely applied to credit risk measu...

This paper sets out to estimate expected lifetime of revolving credit facilities (e.g. credit card products) and is motivated by the introduction of the International Financial Reporting Standard 9 (IFRS 9) and its requirements for loan impairments. The reporting entity is required to estimate lifetime expected credit losses for certain financial instruments. In practice, maximum contractual pe...

We present a multi-step model to measure portfolio credit risk that integrates exposure simulation and portfolio credit risk techniques. Thus, it overcomes the major limitation currently shared by portfolio models with derivatives. Specifically, the model is an improvement over current portfolio credit risk models in three main aspects. First, it defines explicitly the joint evolution of market...