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Title: 

A Survey of Cyclical Effects in Credit Risk Measurement Models

Authors: Allen, Linda
Saunders, Anthony
Issue Date: May-2002
Series/Report no.: S-CDM-02-04
Abstract: We survey both academic and proprietary models to examine how macroeconomic and systematic risk effects are incorporated into measures of credit risk exposure. Many models consider the correlation between the probability of default (PD) and cyclical factors. Few models adjust loss rates (loss given default) to reflect cyclical effects. We find that the possibility of systematic correlation between PD and LGD is also neglected in currently available models.
URI: http://hdl.handle.net/2451/26769
Appears in Collections:Credit & Debt Markets

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