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Credit crisis sparks new approach to assessing regulatory capital requirements.

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Reconciling Credit Correlations
Andrew Chernih, Luc Henrard, Steven Vanduffel

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The credit crisis has led regulators to rethink how they determine capital requirements, especially when it comes to assessing credit risk. Without enough data on defaults, industry professionals often use a financial model called Merton's model of the firm. This model is also the basis for modern solvency standards like Basel II and Solvency II.