Daily Archives: March 17, 2014

Credit Portfolio Modeling Handbook

Credit risk has been in the headlines for the last few years. The volatility in the credit
market a few years ago and the turmoil surrounding the major defaults of Enron,
WorldCom and Marconi have forced credit investors to pay close attention to risk and
reward. But despite these, the appetite for credit risk has not diminished, and historically
low interest rates have made investors turn to credit to provide extra return. Every year
the credit derivatives and structured credit markets have grown at a great pace.
According to the British BankersĂ­ Association survey published at the end of September
2004, total outstanding notionals of credit derivatives have jumped during the first half of
2004 from $3.55 trillion at the end of 2003 to $5.02 trillion, and are predicted to surpass
the $8.2 trillion mark by 2006.
The volatility in the investment grade market in 2002 also forced dealers and end-users
to develop analytics to support their investment decisions, as it was found that the
traditional rating and fundamental research proved insufficient to evaluate credit risk.
This has resulted in an increased interest in credit risk modeling in the academic world,
and only recently these techniques are being implemented in real-world applications.

Download on https://www.credit-suisse.com/investment_banking/platforms_applications/doc/credit_portfolio_modeling.pdf