Credit Portfolio Risk and PD Confidence Sets through the Business Cycle ∗

@inproceedings{Trueck2005CreditPR,
  title={Credit Portfolio Risk and PD Confidence Sets through the Business Cycle ∗},
  author={Stefan Trueck and Svetlozar T. Rachev},
  year={2005}
}
Transition matrices are an important determinant for risk management and VaR calculations in credit portfolios. It is well known that rating migration behavior is not constant through time. It shows cyclicality and significant changes over the years. We investigate the effect of changes in migration matrices on credit portfolio risk in terms of Expected Loss and Value-at-Risk figures for exemplary loan portfolios. The estimates are based on historical transition matrices for different time… CONTINUE READING
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