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SSRN Electronic Journal
Article . 2014 . Peer-reviewed
Data sources: Crossref
The Journal of Risk Model Validation
Article . 2014 . Peer-reviewed
Data sources: Crossref
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Comparative Analysis of Credit Risk Models for Loan Portfolios

Authors: Han, C.;

Comparative Analysis of Credit Risk Models for Loan Portfolios

Abstract

This study is distinct from previous studies in its inclusion of new models, consideration of sector correlation and performance of comprehensive sensitivity analysis. CreditRisk++, CreditMetrics, the Basel II internal-ratings-based method and the Mercer Oliver Wyman model are considered. Risk factor distribution and the relationship between risk components and risk factors are the key distinguishing characteristics of each model. CreditRisk++, due to its extra degree of freedom, has the highest flexibility to fit various loss distributions. It turns out that sector covariance is the most important risk component for risk management in terms of risk sensitivity. Risk sensitivities not only differ between models but also depend on the input parameters and the quantile at which risk is measured. This implies that risk models can only be judged in terms of the portfolio under consideration, and banks should evaluate them based on their own portfolios.

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United Kingdom
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    popularity
    This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
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    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
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    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
2
Average
Average
Average
Green
bronze