Credit risk models revolutionize financial safety and soundness measures
The article discusses credit risk models and their impact on financial institutions, focusing on the Basel Accords. It explores the evolution of credit modeling techniques, testing methods, and the implications for managing risk and capital allocation. The researchers examine the influence of macro factors on default risk, the importance of internal ratings, and the role of collateral in valuation models. The study also delves into credit derivatives, collateralized debt obligations, and future developments in credit modeling.