I am working in the area of building credit risk models. Upto this point, the model I have been focused on using the Asymptotic Single Factor Model, more popularly known as Vasicek Single Factor Model. The single factor being representative of the state of the economy.
Now I want to evaluate a more elaborate multiple factor model as used in KMV etc. I am looking specifically for guidance on the following
Are their any fundamental papers/references on multi factor credit risk models (A very popular one seems to be one by Michael Pykhtin available here And also one by algorithmics available here.)
What should the multiple factors be - geographical location/industry/sector etc.?
What would be the expected benefit of multiple factors over a single factor model? Would the Expected Loss, Unexpected Loss and ECAP be expected to be lower/higher compared to a single factor model?
Looking for academicians, industry practitioners, modeling experts for any guidance. Thanks in advance